17 States With Their Own Estate, Inheritance Taxes

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While the federal government levies an estate tax, 17 states and the District of Columbia take a cut of their own when a wealthy resident dies.

Estate and inheritance taxes at the state level were more common before 2001, when a federal “death tax” credit offsetting those taxes was repealed. But estate and inheritance taxes still bring in about $5 billion a year in state revenue, according to the Center on Budget and Policy Priorities.

Estate and inheritance tax rates and thresholds differ by state — and in Nebraska’s case, by county, according to the American College of Trust and Estate Counsel.

Estate Tax vs. Inheritance Tax

An estate tax is calculated based on the net value of all the property owned by the deceased as of the date of death. The estate’s liabilities are subtracted from the overall value of the property to determine the net taxable estate. Any resulting tax bill is paid by the estate.

An inheritance tax is calculated based on the value of individual bequests received from the estate. Beneficiaries are liable for paying this tax, although a will sometimes provides that the estate should pick up this tab as well.

Federal Estate Tax

The federal estate tax exemption, indexed for inflation, is $11.7 million for 2021 (for married couples, it is $23.4 million). Estate value above this threshold is taxed.

State exemptions or thresholds are lower. If the state threshold is $5 million, and the net value of the estate is $6 million, the amount taxed is $1 million.

Estate and Inheritance Taxes by State

Above are the states that levy their own estate and inheritance taxes.

Descriptions and thresholds are per ACTEC as of July 2021. Tax rates are per the Tax Foundation as of September 2020.

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