Inheritance Tax vs Estate Tax
Estate tax is paid by the estate before distribution. Inheritance tax is paid by the beneficiary after receiving. Six states still levy inheritance tax. This calculates both for a 2026 estate.
| Gross estate | — |
| Adjusted taxable estate | — |
| Federal exemption 2026 (OBBB) | — |
| Federal estate tax (40% above exemption) | — |
| State inheritance tax | — |
| Total tax | — |
| Net inherited | — |
Federal estate tax is paid by the estate; state inheritance tax is paid by the beneficiary. Both can apply. The 2025 OBBB law raised the federal exemption to $15M per person ($30M married) for 2026, sparing all but ultra-HNW estates.
Federal Estate Tax Mechanics
Estate files Form 706 if gross estate exceeds the exemption. Adjusted taxable estate = gross − debts − marital deduction − charitable bequests. Tax = 40% on excess above exemption. Portability lets surviving spouse use deceased spouse's unused exemption (DSUE).
State Inheritance Taxes 2026
Six states tax inheritances (paid by beneficiary): Iowa (phasing out by 2025), Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania. Rates 0-18% with exemption amounts based on beneficiary relationship. Spouses usually exempt.
State Estate Taxes
Twelve states + DC tax estates separately from federal: CT, HI, IL, ME, MD, MA, MN, NY, OR, RI, VT, WA, DC. Exemptions range from $1M (OR) to $13M (CT). State exemption usually NOT linked to federal.
OBBB 2026 Tax Changes
One Big Beautiful Bill Act (P.L. 119-21, July 2025) made the TCJA estate exemption permanent and raised it to $15M per person for 2026, indexed for inflation. Eliminated the 2026 sunset that would have halved to ~$7M.
Last updated May 2026. Sources: IRS Estate Tax, P.L. 119-21 OBBB.