How Does Your State Stack Up?
When the time comes to pass down your assets to the next generation, estate and inheritance taxes can have a big impact on the amount your heirs are eligible to receive. Much attention is given to federal estate taxes, but have you considered how state estate and inheritance taxes may impact your legacy? If you live in certain states, your estate may face significant tax exposure. How does your state stack up? Let’s take a look.
What’s the difference between estate and inheritance tax?
There’s a distinction between estate and inheritance tax. Estate taxes apply to the overall value of an estate and are paid by the decedent’s estate before any assets are distributed to heirs. In contrast, inheritance taxes are based on the amount distributed to each heir and are remitted by the recipient of the inheritance.
Federal estate taxes
Before we get into state specifics, let’s consider the impact of federal estate taxes.
In 2025, the lifetime gift tax exemption is $13.99 million per individual, $27.98 million per married couple filing jointly. That means you can give up to this amount throughout your life (and after you die) without paying taxes.
However, if Congress takes no action in the meantime, the lifetime gift tax exemption is set to sunset at the end of 2025, along with other provisions of the Tax Cuts and Jobs Act of 2017. If this sunset occurs, the lifetime exemption amount is expected to drop to approximately $6 million in 2026.
Your heirs will be subject to federal estate taxes on any amount that exceeds the lifetime gift tax exemption amount.
Federal inheritance taxes
The United States doesn’t impose a federal inheritance tax, but several states levy one.
State estate taxes
As of 2025, 12 states and the District of Columbia assess estate taxes. Most of these are progressive, with varying amounts of exemptions, as noted below.
State inheritance taxes
As of 2025, five states have inheritance taxes, as noted in the table below.
