Estate Tax vs Inheritance Tax

Key Differences

Estate tax and inheritance tax are both taxes on the transfer of wealth after death, but they work differently and are paid by different parties.

States with Estate Tax

The following 13 jurisdictions impose their own estate tax in addition to the federal estate tax:

States with Inheritance Tax

The following 5 states impose an inheritance tax:

Note: Maryland is the only state that imposes both an estate tax and an inheritance tax. Iowa repealed its inheritance tax effective January 1, 2025.

How Inheritance Tax Rates Work

Inheritance tax rates typically depend on the relationship between the beneficiary and the deceased person. Most states that impose an inheritance tax exempt surviving spouses entirely and often exempt or tax direct descendants (children, grandchildren) at reduced rates. More distant relatives and unrelated beneficiaries are generally taxed at higher rates.

For example, a child inheriting $500,000 might owe no inheritance tax or a very low rate, while a non-related beneficiary inheriting the same amount could face rates of 15% or more, depending on the state.

Planning Implications

Understanding whether your state imposes an estate tax, inheritance tax, or both is critical for effective estate planning. In states with estate tax, the focus is on reducing the total value of the taxable estate below the exemption. In states with inheritance tax, the focus may shift to how assets are distributed among beneficiaries.

For detailed information about estate tax rules in your state, visit our state-by-state guide. For federal estate tax details, see our federal estate tax page.