Inheritance Tax Calculator

What Is Inheritance Tax?

Inheritance tax is a state-level tax imposed on beneficiaries who receive property or assets from a deceased person's estate. Unlike the federal estate tax which is paid by the estate itself based on its total value, inheritance tax is calculated separately for each beneficiary based on the value of assets they receive and their relationship to the decedent. As of 2025, only six states impose inheritance taxes: Pennsylvania, New Jersey, Maryland, Nebraska, Kentucky, and Iowa. Each state has its own unique rate structure, exemption amounts, and filing requirements.

The relationship between the beneficiary and the decedent is the most significant factor in determining the inheritance tax rate. Spouses and charities are universally exempt from inheritance tax in all states. Children and grandchildren typically receive very favorable rates, ranging from 0% to 4.5%. Siblings face moderate rates between 4% and 15%, while unrelated beneficiaries and distant relatives face the highest rates, ranging from 10% to 18%. Some states classify beneficiaries into classes (A, B, C, or 1, 2, 3) with progressively higher rates for more distant relationships.

Inheritance tax planning is an important component of comprehensive estate planning in affected states. Strategies to minimize inheritance tax include lifetime gifting to reduce the taxable estate, using trusts to control asset distribution and timing, purchasing life insurance through an irrevocable life insurance trust, and in some cases, relocating to a state without inheritance tax. Executors must file state inheritance tax returns within the statutory time period, typically 9-12 months from the date of death, and the tax must be paid before assets can be fully distributed to beneficiaries.

Inheritance Tax Formula

Taxable Inheritance = Inheritance Amount - Applicable Exemption

Inheritance Tax = Taxable Inheritance x Applicable Tax Rate

Effective Tax Rate = (Inheritance Tax / Total Inheritance) x 100%

Net Inheritance = Total Inheritance - Inheritance Tax Paid

Example Scenario

Sarah inherits $250,000 from her father's estate in Pennsylvania. As a child of the decedent, she qualifies for the Class A rate of 4.5% with no exemption for direct descendants.

Inheritance Tax Cost Breakdown

Frequently Asked Questions

What is inheritance tax?

Inheritance tax is a state-level tax imposed on beneficiaries who receive assets from a deceased person's estate. The rate depends on the beneficiary's relationship to the decedent and the state where the decedent lived.

Which states impose inheritance tax?

As of 2025, six states impose inheritance taxes: Pennsylvania, New Jersey, Maryland, Nebraska, Kentucky, and Iowa. Other states may have estate taxes or neither.

How is inheritance tax different from estate tax?

Estate tax is paid by the estate based on its total value. Inheritance tax is paid by individual beneficiaries based on their relationship to the decedent and the amount they receive.

What is the inheritance tax rate for spouses?

Spouses are generally exempt from inheritance tax in most states, receiving a 0% rate or full exemption.

What is the inheritance tax rate for children?

Children generally receive favorable rates: 0% in NJ, MD, KY, and IA; 4.5% in PA; and 1-5% in NE depending on the amount inherited.

What is the inheritance tax rate for siblings?

Siblings face higher rates: 12% in PA, 15% in NJ, 10% in MD, 6-10% in NE, 4% in KY, and 5% in IA.

What is the inheritance tax rate for other beneficiaries?

Unrelated beneficiaries face the highest rates: 15% in PA, 15-18% in NJ, 10% in MD, 11-15% in NE, 4-16% in KY, and 10-12% in IA.

How is inheritance tax calculated?

Inheritance tax is calculated by determining the taxable inheritance amount (inheritance minus applicable exemptions) and applying the appropriate rate based on relationship.

What is the Pennsylvania inheritance tax rate?

PA rates: spouse 0%, children/grandchildren 4.5%, siblings 12%, other beneficiaries 15%. Rates apply to the fair market value of inherited assets.

What is the New Jersey inheritance tax rate?

NJ rates: spouse 0%, children/grandchildren 0%, siblings 15%, other beneficiaries 15-18%. NJ exempts Class A beneficiaries entirely.

What is the Maryland inheritance tax rate?

MD rates: spouse 0%, children/grandchildren 0%, siblings and other 10%. Maryland also has a separate state estate tax.

What is the Nebraska inheritance tax rate?

NE rates: spouse 0%, children/grandchildren 1-5% (based on amount), siblings 6-10%, other 11-15%. Rates vary by county as well.

What is the Kentucky inheritance tax rate?

KY rates: spouse 0%, children/grandchildren 0%, siblings 4%, other beneficiaries 4-16% on amounts over exemptions.

What is the Iowa inheritance tax rate?

IA rates: spouse 0%, children/grandchildren 0%, siblings 5%, other beneficiaries 10-12%. Iowa is phasing out its inheritance tax.

What is the inheritance tax exemption?

Each state provides exemptions based on relationship. Spouses and charities are fully exempt. Children and grandchildren receive higher exemptions than siblings or unrelated beneficiaries.

Are life insurance proceeds subject to inheritance tax?

In most states, life insurance proceeds paid to named beneficiaries are exempt from inheritance tax, but rules vary by state.

Are retirement accounts subject to inheritance tax?

Retirement accounts including IRAs, 401(k)s, and pensions may be subject to inheritance tax depending on state law and beneficiary designation.

Does inheritance tax apply to real estate?

Yes, inherited real estate is generally subject to inheritance tax based on its fair market value at the date of death, with certain exemptions available.

When is inheritance tax due?

Inheritance tax is typically due within 9-12 months of the date of death, though some states offer discounts for early payment.

Who pays the inheritance tax?

The executor typically pays inheritance tax from the estate before distributing assets, but the tax is ultimately borne by the beneficiary receiving the assets.

How do I file inheritance tax returns?

Each state has its own inheritance tax return form. The executor must file the return and pay the tax within the statutory time period.

What is the effective inheritance tax rate?

The effective rate is the total inheritance tax divided by the total inheritance amount. This varies greatly based on relationship, exemptions, and state rates.

Can inheritance tax be avoided?

Strategies include gifting during lifetime, using trusts, purchasing life insurance in an ILIT, moving to a state without inheritance tax, and proper estate planning.

What is the net inheritance after tax?

Net inheritance is the inheritance amount minus inheritance tax paid. This is the actual amount the beneficiary receives.

Do I need to file an inheritance tax return?

Filing requirements vary by state. Most states require a return when the inheritance exceeds certain thresholds or when tax is due.

Are there penalties for late inheritance tax payment?

Yes, states charge interest and penalties for late filing and payment. Rates range from 5-12% per year depending on the state.

Does inheritance tax apply to digital assets?

Digital assets including cryptocurrency, online accounts, and digital property may be subject to inheritance tax if they have monetary value.

How does inheritance tax affect estate planning?

Inheritance tax considerations influence estate plan structure, beneficiary designations, trust usage, and lifetime gifting strategies to minimize tax burden.

What is a qualified disclaimer?

A qualified disclaimer allows a beneficiary to refuse an inheritance, which then passes to the next beneficiary as if the disclaiming beneficiary predeceased the decedent.

How are trusts used to minimize inheritance tax?

Trusts can be structured to provide income to beneficiaries without transferring ownership, potentially reducing or deferring inheritance tax liability.

What is the difference between probate and non-probate assets?

Probate assets pass through the will and are subject to inheritance tax. Non-probate assets (joint property, beneficiary-designated accounts) may have different tax treatment.

Are charitable bequests subject to inheritance tax?

Inheritances to qualified charitable organizations are generally exempt from inheritance tax in all states.

How does inheritance tax apply to out-of-state beneficiaries?

Out-of-state beneficiaries are generally subject to the inheritance tax of the state where the decedent resided, not where the beneficiary lives.

Why use an inheritance tax calculator?

An inheritance tax calculator helps beneficiaries and executors estimate the tax due on inherited assets, plan for payment, and explore strategies to minimize the tax burden.

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External Resources

• IRS - Estate & Gift Tax — IRS resources on estate tax, gift tax, and generation-skipping transfer tax rules and filing requirements.
• Nolo - Estate Planning — Nolo estate planning guides covering wills, trusts, probate, and inheritance laws.
• ABA - Real Property Trust & Estate — American Bar Association resources on estate planning, trust administration, and probate law.
• FindLaw - Estate Planning — FindLaw estate planning resources including wills, trusts, probate, and tax planning guides.
• Investopedia - Estate Planning — Comprehensive estate planning guides covering trusts, tax strategies, and wealth transfer techniques.
• Cornell LII - Estate Planning — Cornell Legal Information Institute overview of estate planning laws, regulations, and tax considerations.