States With an Inheritance Tax (Recently Updated for 2026)
If you're planning to set aside an inheritance for your loved ones, we recommend researching your state’s inheritance tax laws. As of January 1st, 2026, five states have an inheritance tax and twelve states plus DC levy an estate tax.
While estate taxes are only collected from a small percentage of extremely wealthy families, inheritance taxes can be collected from anyone that resides in a state that levies them.
This guide outlines the six states that impose an inheritance or death tax. We’ve also listed each state’s inheritance tax rates. This will help you calculate the amount your heirs will owe the state when you pass away.
Here’s what we'll cover in this post:Quick Article Guide
Which States Have an Inheritance Tax?
Currently, there are five states that collect an inheritance tax. These states include:- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania.
The amount of the inheritance tax your heirs will owe depends on how they are related to you and whether or not your state offers an exemption. Direct family members are usually exempt from state inheritance taxes, but this is not always the case with in-laws, cousins, and half siblings.
In the following section, we’ve broken down each state’s inheritance tax laws and rates. We've also included some proven strategies that can prevent your loved one’s from owing taxes on the assets you intend to leave them.
Inheritance Tax Rates and Brackets in Iowa
On January 1, 2025, Iowa eliminated it's inheritance tax. Prior to these changes, only immediate family members, also known as “Schedule A” beneficiaries were exempt from these inheritance taxes. If the death occured prior to January 1, 2025, inheritance taxes may still be owed under the prior law.
Inheritance Tax Rates and Brackets in Kentucky
In Kentucky, inheritance beneficiaries are classified into one of three categories: Class A, Class B, or Class C. As of June 30, 1998, Class A beneficiaries include a surviving spouse, parents, children, grandchildren, brothers, sisters, half-brothers, and half-sisters. Class A beneficiaries are fully exempt from Kentucky inheritance taxes.
Effective January 1, 2026, Kentucky amended its inheritance tax laws to also exempt Class B beneficiaries. This group includes the deceased’s nieces, nephews, half-nieces, half-nephews, aunts, uncles, sons-in-law, daughters-in-law, and great-grandchildren. Prior to this change, inheritances exceeding $1,000 received by Class B beneficiaries were subject to inheritance tax rates ranging from 4% to 16%.
Class C beneficiaries include anyone who does not fall under Class A or Class B, as well as any cousins of the deceased. These beneficiaries receive an exemption of $500, and any inheritance exceeding this amount is taxed at rates ranging from 6% to 16%.
We’ve further illustrated the inheritance tax rates for Class C beneficiaries in the table below:
Inheritance Tax Rates for Class C Beneficiaries
| Total Amount of Inheritance | |
| $500 to $999 | 6% of amount over $500 |
| $1,000 to $9,999 | $30 + 6% of amount over $1,000 |
| $10,000 to $19,999 | $570 + 8% of amount over $10,000 |
| $20,000 to $29,999 | $1,370 + 10% of amount over $20,000 |
| $30,000 to $44,999 | $2,370 + 12% of amount over $30,000 |
| $45,000 to $59,999 | $4,170 + 14% of amount over $45,000 |
| $60,000 to $99,999 | $6,270 + 16% of amount over $60,000 |
| $100,000 to $199,999 | $12,670 + 16% of amount over $100,000 |
| $200,000 or more | $28,670 + 16% of amount over $200,000 |
Kentucky offers a 5% discount to individuals that pay with nine months of the decedent's death. Those owing more than $5,000 also have an option to make 10 equal payments and avoid penalty.
To help your heirs avoid inheritance taxes, consider a permanent life insurance policy with a fixed death benefit until the age of 100 or later. Any individual that is listed as your beneficiary will not be subject to inheritance taxes, even if they are not a member of Class A.
The best type of life insurance coverage for leaving an inheritance behind is known as guaranteed universal life insurance. These policies do not require any investing and they offer lifelong coverage with a fixed rate.
Inheritance Tax Rates and Brackets in Maryland
Maryland is currently the only state that imposes an estate tax and an inheritance tax. The difference between the two is that an estate tax is levied against the entire estate, regardless of who the beneficiaries of the estate are.
An inheritance tax, on the other hand, can be collected from anyone that receives money from the deceased.
Beneficiaries that are exempt from Maryland’s inheritance tax include:
- For decedents who pass away on or after July 1, 2000 - children or other lineal descendant, the spouse of a child or other lineal descendant, a spouse, parent, grandparent, step-child or step-parent, siblings, or a corporation only having certain of these people as stockholders.
- For decedents who pass away on or after July 1, 2009 - a primary residence owned by domestic partners that was held in joint ownership at the time of the decedent’s death.
If any other beneficiary receives property after the decedent has passed - including property passed to a domestic partner other than a jointly-owned primary residence - is contingent to Maryland’s inheritance tax. The current Maryland tax rate is 10%.
On October 1st, 2020, Maryland's General Assembly amended the estate tax laws to include spousal portability. With proper estate planning this allows the surviving spouse to double their estate's exemption (by utilizing their spouse's unused exemption) to $10,000,000.
Individuals with a net worth exceeding $5 million, and married couples worth more than $10 million, should consider an irrevocable trust to preserve their estate. This is especially true for those worth more than the federal exemption of $15 million. In this scenario, your heirs could owe state and federal estate taxes, personal inheritance taxes.
An irrevocable life insurance trust can help you preserve your estate by separating your life insurance policy from your personal assets. The death benefit can then be used to settle your estate's tax obligations with the IRS and state, leaving your assets free and clear. To learn more, call us at 855-247-9555 or request a quote below.
Inheritance Tax Rates and Brackets in Nebraska
On July 1, 2025, Nebraska amended its inheritance tax laws. This allows more immediate relatives to retain a greater portion of the money left behind for them. Nebraska classifies inheritance beneficiaries into three categories: Class 1, Class 2, and Class 3. Surviving spouses and most charities are fully exempt from Nebraska inheritance taxes.
These are current exemptions from Nebraska’s inheritance tax:
- Surviving spouses and charities - fully exempt
- Immediate relatives (Class 1) include parents, grandparents, siblings, children, and other lineal descendants, including legally adopted individuals. Class 1 beneficiaries receive an exemption of $100,000, and any inheritance exceeding this amount is taxed at a rate of 1%.
- Remote relatives (Class 2) include aunts, uncles, nieces, and nephews related to the decedent by blood or legal adoption, as well as other lineal descendants of those individuals. This class also includes the spouse or surviving spouse of any such person. Class 2 beneficiaries receive an exemption of $100,000, and any inheritance exceeding this amount is taxed at a rate of 1%. For deaths occurring before July 1, 2025, the exemption was $40,000, with an 11% tax rate.
- Any other transferees (Class 3) include beneficiaries who do not fall under Class 1 or Class 2. Class 3 beneficiaries receive an exemption of $25,000, and any inheritance exceeding this amount is taxed at a rate of 15%. Inheritance tax rules for Class 3 beneficiaries were not changed under the new law.
- Any money from the estate that immediate family members are entitled to, certain payments from employee benefit plans, and insurance policy proceeds that go to a named beneficiary (not the estate) - fully exempt
The following table outlines the inheritance tax rates for Nebraska beneficiaries:
| Relation to Deceased: | Beneficiary Class: | Exemption Amount: | Tax Rate: |
| Immediate relatives | 1 | $100,000 | 1% |
| Remote relatives | 2 | $40,000 | 11% |
| All other transferees | 3 | $25,000 | 15% |
The death benefit from a life insurance policy is not taxed in Nebraska. So if you're planning to leave your assets to anyone other than your spouse, consider purchasing a permanent life insurance policy. These policies can be used to provide an untaxed inheritance, or fund an ILIT.
To learn more about using life insurance to leave an inheritance or fund an irrevocable life insurance trust, call us at 855-247-9555. You can also instantly compare rates for a permanent life insurance policy using our form below.
Inheritance Tax Rates and Brackets in New Jersey
In October 2016, Governor Christie signed new legislation into law that would repeal any existing estate tax laws by 2018. Despite repealing their estate tax laws, New Jersey will continue to collect taxes from anyone who receives an inheritance from one of their residents. Like other states that collect an inheritance tax, New Jersey groups its beneficiaries into classes.
Class “A” beneficiaries are exempt from inheritance taxes in the state of New Jersey. These beneficiaries include a surviving spouse, domestic partner, civil union partner, child, grandchild, great grandchild, parent, grandparent, great grandparent, step-child, adopted child, or a mutually acknowledged child.
In 1963, New Jersey eliminated their Class “B” schedule, but they continue to assign any beneficiary that does not belong in Class A to Class C, D, or E. We’ve broken down the beneficiaries assigned to each of these classes and their respective tax rates in the table below:
| Relation to Deceased: | Beneficiary Class: | Amount of Inheritance: | Tax Rate: |
| Brother, sister, son-in-law, and daughter-in-law | C | Up to $25,000 | 0% |
| Up to $1,075,000 | 11% | ||
| Next $300,000 | 13% | ||
| Next $300,000 | 14% | ||
| Over $1,700,000 | 16% | ||
| Any transferee, distributee, or beneficiary not classified as A, C, or E | D | First $700,000 | 15% |
| Over $700,000 | 16% | ||
| Charities, religious institutions, educational and medical institutions, the State of New Jersey or any political subdivisions of New Jersey | E | N/A | 0% |
In New Jersey, any individual who receives an inheritance for less than $500, or the proceeds from a life insurance policy, is also exempt from inheritance taxes. For this reason, most financial advisers recommend buying life insurance to leave an inheritance to any individual or entity that does not belong to Class C or E.
Life insurance payouts are confidential, which prevents your surviving family members from seeing who you left your inheritance to. In addition, the payout from a life insurance policy is not subject to intervention from the courts, or any surviving family members.
Inheritance Tax Rates and Brackets in Pennsylvania
Like New Jersey, Pennsylvania is an inheritance tax-only state. If you are a surviving spouse of the deceased in Pennsylvania, your tax rate is based on the date of the decedent.
For deaths that occurred on or after January 1, 1995, transfers to the surviving spouse are completely exempt. In addition, if a child under the age of 21 dies after August 31, 2000, their estate will transfer to the child’s natural parent, step-parent, or adoptive parent untaxed.
In Pennsylvania, working family farms (with a gross income of at least $2,000), and property owned jointly between a husband and wife, are also exempt. Like other state, most charitable organizations and government entities are also exempt from any inheritance taxes.
All other beneficiaries fall into one of the a following classes: Class A, Class A1, and Class B.
Class A includes lineal descendants, meaning children, their descendants (whether or not they have been adopted by others) and step-descendants. In addition, Class A also includes parents and grandparents, the spouse of a child, or the surviving spouse if a child is deceased (as long as he or she has not remarried).
Class A1 includes brothers, half-brothers, sisters, half-sisters, and any person having at least one parent in common with the decedent (either by blood or adoption).
Class B includes all other beneficiaries.
The following table outlines the inheritance tax rates for Class A, A1, and B beneficiaries:
| Relation to Deceased: | Beneficiary Class: | Exemption Amount: | Tax Rate: |
| Descendants, step-descendants, parents, grandparents, spouse of a child, or surviving spouse of a deceased child | A | $3,500 | 4.5% |
| Brothers, half-brothers, sisters, half-sisters, or any person having at least 1 parent in common with decedent | A1 | $0 | 12% |
| All other beneficiaries | B | $0 | 15% |
If your heir will owe inheritance taxes, these taxes are due within nine calendar months of your passing. If the inheritance tax is paid within three months of the date of death, Pennsylvania applies a 5% discount.
If the deceased had a life insurance policy, the death benefit is exempt from the state inheritance tax, regardless of who the death benefit is paid to. Similar to Iowa, you can reduce or avoid any estate tax liabilities by purchasing a permanent life insurance policy. Your beneficiary will not be subject to inheritance taxes in Pennsylvania.
Still Have Questions? We Can Help!
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Give us a call today toll free at 855-247-9555 to speak with a licensed agent, or you can request a free quote below. In less than a minute our website will compare rates from dozens of insurers to help you find your best option.
Written by:
Clifford Pendell
Managing Partner and Co-founder
Cliff is a licensed life insurance agent and one of the owners of JRC Insurance Group. He has helped thousands of families of businesses with their life insurance needs since 2012 and specializes with applicants who are less than perfect health. In his spare time he enjoys spending time with family, traveling, and the great outdoors.
Expert reviewed by:
Louis Lopes, CLU ChFC
Chartered Life Underwriter, Licensed Life and Health Agent
Louis has been in the insurance business for over 30 years. He specializes in “high risk” cases as well as more complex coverages for long term care, disability, and estate planning.
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Questions From Our Visitors
Some of the questions we received from our website visitors:
HI . I do NOT live in Iowa but will the money I leave to family that do live there be subject to iowa inheritance tax? 2. Would Roth IRa or Traditional IRa monies be exempt for them? 3. I understand that my life insurance would not be subject to the tax. thanks for helping. Katrina
Hi Katrina, We recommend consulting with a tax professional in your state. This article was prepared for informational purposes only. Our licensed agents are not qualified to provide, and should not be relied on for, tax, legal or accounting advice. Thanks for visiting, Cliff Pendell