Inheritance Tax in 2026: Which States Tax What You Receive?

You learn that a parent, sibling, or friend has left you money. Before deciding what to do with it, you want to know how much you can keep. The answer depends on whether you're asking about inheritance tax, estate tax, or income tax.

There is no general federal inheritance tax charged to heirs simply because they receive an inheritance. Five states impose inheritance taxes, and the beneficiary's relationship to the deceased can change the result. Income earned from inherited property and distributions from certain inherited accounts raise separate questions.

Updated October 22, 2026. This article discusses general U.S. rules and state inheritance tax provisions applicable in 2026. Special international and expatriate rules aren't covered.

Estate tax, inheritance tax, and income tax have different jobs

Three taxes families often confuse

Tax	What it generally concerns
Estate tax	The transfer of a deceased person's estate, considering its taxable value, available exemption, gifts, and deductions.
Inheritance tax	A beneficiary's receipt of property, often using exemptions and rates based on the relationship to the deceased.
Income tax	Taxable income, such as certain inherited retirement-account distributions, interest, rent, or gains on a later sale.

These rules can overlap. Maryland has both estate and inheritance taxes, with coordination rules that affect the calculation. And an inheritance can be free of estate and inheritance tax while still producing taxable income later.

The IRS explains that inherited property generally isn't included in federal income, while income the property produces can be taxable. Avoid treating the phrase “tax-free inheritance” as an answer to every future transaction.

Which states have an inheritance tax in 2026?

The five states are Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Their rules are not interchangeable. There isn't one nationwide inheritance allowance, and a close relative who is exempt in one state can owe tax in another.

General inheritance tax rules by state in 2026

State	Common exemptions and rates
Kentucky	Class A beneficiaries, including a spouse, parent, child, grandchild, or sibling, are exempt. Class B beneficiaries generally receive a $1,000 exemption and pay 4%–16%; Class C beneficiaries receive a $500 exemption and pay 6%–16%.
Maryland	Spouses, children and other lineal descendants, parents, grandparents, and siblings are among the exempt beneficiaries. Nonexempt beneficiaries generally face 10%, subject to property and small-transfer exemptions.
Nebraska	A surviving spouse is exempt. For other beneficiaries age 22 or older, immediate relatives generally pay 1% above $100,000; specified more remote relatives pay 11% above $40,000; other beneficiaries pay 15% above $25,000. Statutory exemptions apply to beneficiaries under 22.
New Jersey	Class A beneficiaries, including a spouse, parent, child, or grandchild, are exempt. Class C beneficiaries generally receive a $25,000 exemption and pay 11%–16% above it. Class D beneficiaries generally pay 15%–16%, subject to a narrow small-transfer rule.
Pennsylvania	Transfers to a spouse receive a 0% rate. Adult children and other lineal heirs generally pay 4.5%; siblings pay 12%; other nonexempt beneficiaries pay 15%. Special 0% rules apply to qualifying parent-child transfers involving someone age 21 or younger.

Beneficiary classifications have detailed definitions covering adoption, stepfamily relationships, spouses of relatives, and other circumstances. New Jersey's beneficiary-class guide, for example, places siblings in Class C rather than the fully exempt Class A. Check the actual category instead of relying on the label “family.”

Why there isn't a single inheritance tax threshold

Federal estate tax uses a large lifetime exemption. State inheritance taxes often work differently: the recipient's category can determine both the exemption and the rate. The federal $15 million estate tax exemption doesn't protect every inheritance from a state's separate tax.

Consider three simplified examples, each assuming the stated amount is the taxable transfer after applicable adjustments:

• A $100,000 Pennsylvania inheritance to an adult child: at the usual 4.5% lineal rate, the tax would be $4,500 before any available payment discount.
• A $100,000 Pennsylvania inheritance to a sibling: at 12%, the tax would be $12,000.
• A $150,000 Nebraska inheritance to a 40-year-old child: with the $100,000 immediate-relative exemption available, 1% of the remaining $50,000 would be $500.

These examples illustrate the Pennsylvania rates and Nebraska's immediate-relative rule. They don't account for every asset exemption, deduction, tax-payment clause, or administration issue that could affect a real distribution.

Which state's law should you check?

Start with the deceased person's legal residence and the location and type of property. Your address alone usually doesn't answer the question. New Jersey expressly states that where the beneficiaries live isn't a factor in its inheritance tax, and it can tax certain New Jersey property owned by a nonresident.

For example, an Oklahoma resident who inherits from a New Jersey resident should still review New Jersey's rules. Likewise, a person who lived outside Pennsylvania but owned real estate there can leave property subject to Pennsylvania inheritance tax. Pennsylvania distinguishes nonresident real and tangible property from intangible property.

Moving, changing a mailing address, or putting property in a trust doesn't by itself resolve every state tax connection. Have someone review the actual ownership and residence facts before relying on an exemption.

Who pays the inheritance tax?

Although the tax depends on a beneficiary's receipt, the beneficiary doesn't always write the check personally. The estate representative may file the return and arrange payment, and a will or trust can affect which share bears the expense.

Maryland's guidance describes payment by either the estate or the recipient, depending on the circumstances and governing provisions. Ask whether a quoted inheritance is a gross amount or the amount expected after taxes and expenses.

Deadlines and discounts also differ. Pennsylvania generally requires its inheritance tax return and payment within nine months after death and offers a 5% discount on qualifying payments made within three months. A deadline to file isn't necessarily the best date to pay. Confirm the applicable state's rules early.

Inherited cash and inherited income aren't the same thing

Receiving inherited cash generally doesn't make that cash federal taxable income. If the money later earns interest, however, the interest may be taxable. Rent and dividends can also create income. An estate or trust may issue Schedule K-1 allocating taxable items to a beneficiary. The IRS survivor and executor guidance explains these distinctions.

An inherited traditional IRA presents a different issue from an inherited checking account. Distributions can be subject to income tax, and inherited retirement accounts have beneficiary-specific withdrawal rules. Before withdrawing money or moving the account, ask the custodian and a qualified tax professional which rules apply.

What if you inherit property and sell it?

For many inherited assets, federal tax basis generally starts with fair market value at the owner's death, or an applicable alternate valuation. That can increase or decrease the basis. A federal estate tax bill isn't required for this general basis rule to apply. The IRS explains inherited-property basis and later sales here.

Suppose inherited stock has a $100,000 date-of-death value and you later sell it for $110,000. If your basis is $100,000, the general gain calculation starts with the $10,000 difference, subject to selling costs and other adjustments. It's not automatically a tax on the entire $110,000. Preserve the valuation and transaction records.

Don't apply this basis example to every inherited asset. Retirement accounts and other income-in-respect-of-a-decedent items have different rules. Nor should you assume that receiving property as a lifetime gift produces the same basis as inheriting it.

Before spending or distributing an inheritance

Ask the estate representative what tax review is complete, whether money is being reserved, and which documents you'll receive. Identify the deceased person's residence, property locations, your beneficiary classification, and the asset's ownership and valuation. Keep final distribution statements, tax forms, and evidence of any payment.

Executors and trustees should resolve tax obligations and an appropriate reserve before treating the remaining balance as distributable. For practical preparation, read Before You Pay Bills or Distribute Property After a Death and What Records Should a Successor Trustee Keep?

For the estate-level exemptions and state thresholds, see Estate Tax in 2026: Federal Exemptions and State Thresholds.

This article provides general educational information, not legal, tax, or financial advice. State classifications, exemptions, deadlines, and individual circumstances vary. Confirm the rules for the applicable date of death and asset with a qualified professional.