You might have heard that when you die, the government can take taxes—informally called death taxes—out of your property. Will this happen to you? If so, how much will your estate or inheritors need to pay? The answer depends on the specific tax, but in most cases, no death taxes will apply. Below, we explain the three types of death taxes and who needs to pay them.
Federal Estate Tax
The most well-known of the death taxes is the federal estate tax. The good news is that the vast majority of people won't need to worry about federal estate tax.
What Is the Federal Estate Tax and Who Has to Pay?
The federal estate tax is imposed by the federal government when someone very wealthy dies. Currently, for deaths in 2025, the tax applies only if you leave behind over $13.99 million worth of property ($27.98 million for couples) when you die. As you might imagine, this affects a very small number of people.
Until the passage of the One Big Beautiful Bill Act in July 2025, the threshold (called the “exemption”) was scheduled to go back to the previous exemption of $5.49 million (with an adjustment for inflation) at the end of 2025. The One Big Beautiful Bill Act increases the exemption to $15 million ($30 million for married couples) beginning in 2026. The new exemption is “permanent,” meaning it won’t be changed or eliminated (except for annual adjustments for inflation) unless a future Congress and president change the estate tax laws.
The federal estate tax exemption has changed before. For example, from 2017 to 2018, the threshold jumped from $5.49 million to $11.18 million. If you don’t know what the threshold will be at your death, how do you plan? If you have significant assets (totaling several million dollars), it’s worth consulting with a lawyer.
How Much Is Federal Estate Tax?
If your estate (all of the property you own at death) does end up triggering the federal estate tax, just how much in taxes will you pay? The federal estate tax rate is quite high—currently, in 2025, it maxes out at 40%—but the tax applies only to the amount over the threshold, meaning any property that exceeds $13.99 million.
State Estate Tax
Some state governments impose their own state estate tax, separately from the federal government.
Which States Have Estate Taxes?
The 13 states that collect a state estate tax are:
Connecticut
District of Columbia
Hawaii
Illinois
Maine
Maryland
Massachusetts
Minnesota
New York
Oregon
Rhode Island
Vermont
Washington
Who Pays State Estate Tax?
Like the federal estate tax, state estate taxes don't apply until your estate is a certain size. This size (the amount of property that triggers the estate tax) varies by state. (Look up the state estate tax threshold in your state.) Notably, in almost all states that have estate taxes, the threshold is significantly lower than the threshold for the federal tax. In Oregon, any estate that's larger than $1 million will incur state estate tax, while in Connecticut, the threshold is equal to the federal exemption ($13.99 million). The other states fall somewhere in between.
How Much Is State Estate Tax?
If you’re feeling discouraged because you live in a state that collects a state estate tax, you can at least take comfort in the fact that the state estate tax rate is much lower than the federal estate tax rate. The exact rate varies by state, but usually ranges from 8% to 16%, with a few exceptions. (Look up the estate tax rate in your state.) Most states tax only the amount above the threshold, but New York works differently.
State Inheritance Tax
State inheritance taxes are falling out of favor, and just a small handful of states still impose them.
Which States Have Inheritance Tax?
The following states currently collect inheritance tax in certain situations:
Kentucky
Maryland
Nebraska
New Jersey
Pennsylvania
Iowa began phasing out its inheritance tax in 2021. Iowa will collect taxes on deaths that occurred before 2025 but will no longer collect inheritance tax on deaths in 2025 and later.
Who Pays State Inheritance Tax?
While the exact rules vary by state, whether your inheritors will need to pay an inheritance tax, and how much they need to pay, will depend on their relationship to you. Usually, very close family members (like spouses or children) don’t pay any tax, and the more distant the relationship, the higher the inheritance tax rate. Find out how your state’s inheritance tax works.
How Much Is State Inheritance Tax?
As mentioned, the exact inheritance tax rate depends on your inheritor’s relationship to you as well as the rules of your state. Unless your inheritor is exempt (for example, because your inheritor is your spouse), your inheritor can expect to pay between 1% and 16%. Within this range, some states increase the inheritance tax rate as the size of the estate increases.
Take, for example, New Jersey’s inheritance tax: Your spouse, parents, grandparents, children, and grandchildren are completely exempt from paying inheritance tax. Siblings and children’s spouses pay a rate of 11-16% (depending on the amount inherited), while everyone else pays a rate of 15-16% (depending on the amount inherited).
Inheritance Tax Vs. Estate Tax
Inheritance taxes work differently from estate taxes. Technically, inheritance taxes are taxes on your inheritors (but only certain inheritors, as explained above). Estate taxes are taxes on your estate. Only a few states have an inheritance tax; several states have an estate tax. And there is no federal inheritance tax, only federal estate tax.
Avoiding Estate and Inheritance Taxes
Strategies for avoiding death taxes include:
- Giving away property up to the annual exclusion each year.
- Setting up an irrevocable life insurance trust (ILIT) for your life insurance proceeds.
- Setting up certain other types of irrevocable trusts.
If you anticipate estate taxes or inheritance taxes when you die, you can consult an experienced estate planning attorney to explore your options. Irrevocable trusts tend to be very complicated, and you’ll need a lawyer to create one.