Inheritance Tax Calculator
Calculate inheritance tax owed based on your relationship to the deceased and state tax laws.
Pennsylvania has no exemption for most beneficiaries but lower rates for children.
Related Calculators
About This Calculator
Inheritance tax is a state-level tax paid by the person who inherits assets from a deceased individual. Unlike estate tax (which taxes the estate before distribution), inheritance tax is based on who receives the inheritance and their relationship to the deceased. Currently, only six states impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
The Good News: Most inheritances are completely tax-free. Close relatives like spouses and children are typically exempt, and most states have no inheritance tax at all. However, if you are inheriting from a distant relative or non-relative in one of the six states with inheritance tax, you could owe a significant amount.
Inheritance Tax vs. Estate Tax:
- Estate Tax: Paid by the estate before distribution, based on estate size
- Inheritance Tax: Paid by beneficiary after receiving inheritance, based on relationship
Some states (Maryland and New Jersey) have both estate tax AND inheritance tax, creating potential double taxation.
Key Factors Affecting Your Tax:
- Your state (only 6 have inheritance tax)
- Your relationship to the deceased
- The value of your inheritance
- The type of assets inherited
For estate-level taxes, see our Estate Tax Calculator. To understand gift tax implications, visit our Gift Tax Calculator.
How to Use the Inheritance Tax Calculator
- 1Select the state where the deceased resided (determines which tax rules apply).
- 2Choose your relationship to the deceased (spouse, child, sibling, other relative, non-relative).
- 3Enter the total value of your inheritance (cash, property, investments, etc.).
- 4Note any exemptions that apply to your situation.
- 5Review your estimated inheritance tax and effective rate.
- 6Understand payment deadlines and options for your state.
States With Inheritance Tax
Only six states currently impose an inheritance tax. The rates and exemptions vary significantly.
Inheritance Tax States (2026)
| State | Tax Rates | Who Pays |
|---|---|---|
| Iowa | 2-6% | Non-lineal heirs (siblings, others) |
| Kentucky | 4-16% | Class B and C beneficiaries |
| Maryland | 10% flat | Non-immediate family |
| Nebraska | 1-18% | Based on relationship class |
| New Jersey | 11-16% | Class C and D beneficiaries |
| Pennsylvania | 4.5-15% | All except spouse |
Exemptions by State
Iowa: Spouse, lineal heirs (children, parents) exempt. Phasing out inheritance tax completely by 2025.
Kentucky:
- Class A (spouse, parent, child, grandchild): Exempt
- Class B (siblings, nephews, nieces): $1,000 exempt, 4-16%
- Class C (all others): $500 exempt, 6-16%
Maryland: Spouse, child, parent, grandparent, grandchild, sibling all exempt. 10% flat rate for others.
Nebraska:
- Immediate family: $100,000 exempt, 1%
- Remote relatives: $40,000 exempt, 11%
- Non-relatives: $25,000 exempt, 15%
New Jersey:
- Class A (spouse, child, parent, grandchild): Exempt
- Class C (siblings, in-laws): $25,000 exempt, 11-16%
- Class D (everyone else): No exemption, 15-16%
Pennsylvania:
- Spouse: Exempt
- Lineal descendants: 4.5%
- Siblings: 12%
- All others: 15%
Relationship Classes Explained
Inheritance tax rates depend heavily on your relationship to the deceased. States use classification systems.
Common Classification Structure
Class A (Usually Exempt)
- Surviving spouse
- Children and stepchildren
- Parents
- Grandchildren
- Grandparents
Class B (Reduced Rates)
- Siblings
- Half-siblings
- Sons-in-law, daughters-in-law
- Nephews and nieces (in some states)
Class C/D (Highest Rates)
- Aunts and uncles
- Cousins
- Friends
- Unmarried partners
- Business associates
- Charities (sometimes exempt)
Special Situations
Adopted Children: Generally treated same as biological children in all states.
Stepchildren: Treatment varies by state. Some treat as Class A, others as Class C.
Domestic Partners: Unless legally married, treated as non-relatives in most states (Class D).
Charities: Usually exempt from inheritance tax regardless of relationship.
Life Insurance: Treatment varies - some states exempt, others include in taxable inheritance.
Calculating Your Inheritance Tax
Inheritance tax calculation follows a straightforward process.
Step-by-Step Calculation
Step 1: Determine your inheritance value
- Include cash, investments, real estate, personal property
- Use fair market value at date of death
Step 2: Identify your relationship class
- Determine which beneficiary class you fall into
- Check state-specific definitions
Step 3: Apply exemptions
- Subtract applicable exemption amount
- Some states have minimum thresholds
Step 4: Apply tax rate
- May be flat rate or graduated
- Apply to amount over exemption
Example Calculations
Pennsylvania - Child inheriting $500,000:
- Relationship: Lineal descendant
- Rate: 4.5%
- Tax: $500,000 × 4.5% = $22,500
Kentucky - Niece inheriting $100,000:
- Relationship: Class B
- Exemption: $1,000
- Rate: Graduated 4-16%
- Tax: ~$11,500
Nebraska - Friend inheriting $200,000:
- Relationship: Non-relative
- Exemption: $25,000
- Rate: 18%
- Tax: ($200,000 - $25,000) × 18% = $31,500
Joint Inheritance
When multiple people inherit the same asset:
- Each beneficiary calculates tax on their share
- Different relationships = different rates
- Each uses their own exemption
Inheritance Tax Planning Strategies
While inheritance tax cannot be completely avoided if you live in an affected state, strategies can minimize the impact.
Change of Residence
The deceased`s state of residence determines inheritance tax. Moving to a non-inheritance-tax state before death eliminates the tax.
Considerations:
- Must be genuine change of domicile
- Not just mailing address change
- Should be done well before death
Gift Assets Before Death
Gifts made during life are not subject to inheritance tax (though federal gift tax rules may apply).
Strategy:
- Annual gift tax exclusion: $18,000 per recipient (2026)
- Lifetime gifts reduce future inheritance
- Gift earlier to maximize benefit
See our Gift Tax Calculator for details.
Use Trusts
Certain trusts can help:
- Bypass Trust: Assets pass to next generation, skipping inheritance tax
- Life Insurance Trust: Keeps insurance proceeds out of estate
- Charitable Trust: Provides tax benefits while supporting causes
Purchase Life Insurance
Life insurance to cover expected inheritance tax:
- Proceeds typically exempt from inheritance tax
- Provides liquidity to pay tax
- Can be owned by trust to avoid estate tax too
Designate Exempt Beneficiaries
Structure inheritance to favor exempt beneficiaries:
- Leave more to spouse/children (usually exempt)
- Leave less to distant relatives/friends (taxed)
- Use specific bequests strategically
Filing and Payment Requirements
Each state has specific deadlines and procedures for inheritance tax.
Filing Deadlines
| State | Filing Deadline | Extension Available |
|---|---|---|
| Iowa | 9 months | Yes, with interest |
| Kentucky | 18 months | Yes |
| Maryland | 11 months | Yes |
| Nebraska | 12 months | Yes |
| New Jersey | 8 months | Yes |
| Pennsylvania | 9 months | Yes |
Payment Options
Pay in Full: Most common, avoids interest
Installment Payments: Some states allow for:
- Closely held business interests
- Real estate
- Hardship situations
Discount for Early Payment: Pennsylvania offers 5% discount for payment within 3 months.
Required Forms
Each state has specific forms:
- Pennsylvania: REV-1500 (Inheritance Tax Return)
- New Jersey: IT-R (Inheritance Tax Return)
- Kentucky: Form 92A200
Penalties
Late Filing:
- Penalties typically 5-25% of tax owed
- Interest accrues from due date
Undervaluation:
- Additional tax plus penalties
- Possible fraud penalties for willful undervaluation
Executor Responsibilities
The estate executor must:
- File inheritance tax returns
- Ensure beneficiaries pay tax (or pay from estate)
- Obtain tax waivers before distributing assets
Inheritance Tax vs. Estate Tax
Understanding the difference between inheritance and estate tax is crucial for planning.
Key Differences
| Feature | Inheritance Tax | Estate Tax |
|---|---|---|
| Who Pays | Beneficiary | Estate |
| Based On | Relationship to deceased | Total estate value |
| States | 6 states | 12 states + DC |
| Federal | No federal inheritance tax | Yes, $13.61M exemption |
Double Taxation States
Maryland and New Jersey have both estate tax AND inheritance tax.
Example in Maryland:
- Estate worth $6 million
- Maryland estate tax: ~$310,000 (on amount over exemption)
- Inheritance tax: 10% on non-exempt beneficiaries
- Combined taxes can significantly reduce inheritance
Federal Estate Tax
The federal estate tax exemption is $13.61 million (2026). Most estates owe no federal tax, but:
- Exemption is scheduled to drop to ~$6-7 million in 2026
- Rates up to 40% on amounts over exemption
- Separate from state inheritance/estate taxes
Step-Up in Basis
Inherited assets receive a step-up in basis to fair market value at death.
Example:
- Deceased paid $100,000 for stock
- Worth $500,000 at death
- Your basis: $500,000 (stepped up)
- If you sell immediately: No capital gains tax
This is separate from inheritance tax - you may owe inheritance tax but still get the step-up.
For complete estate tax analysis, use our Estate Tax Calculator.
Pro Tips
- 💡Verify which state`s laws apply - it is based on where the deceased lived, not where you live.
- 💡Document your relationship to the deceased carefully for classification purposes.
- 💡Get professional appraisals for real estate and valuable personal property.
- 💡File inheritance tax returns on time to avoid penalties and interest.
- 💡Consider paying early in Pennsylvania for the 5% discount.
- 💡Keep records of all inherited assets and their values at date of death.
- 💡Understand the step-up in basis benefit for capital gains purposes.
- 💡If you expect a large inheritance, discuss planning strategies with the potential deceased.
- 💡Consider life insurance to cover expected inheritance tax liability.
- 💡Consult an estate attorney if inheriting from a resident of a state with inheritance tax.
- 💡Check if any assets have been disclaimed or distributed differently than expected.
- 💡Request tax waivers before selling or transferring inherited assets.
Frequently Asked Questions
It depends on two factors: (1) what state the deceased lived in, and (2) your relationship to them. Only Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania have inheritance tax. Even in these states, spouses and often children are exempt. Most people pay no inheritance tax.
