How Much Are Death Taxes?

Estate tax is paid by the estate itself before assets are distributed to heirs. It is based on the total estate value. Inheritance tax is paid by individual beneficiaries on what they receive, with rates varying by their relationship to the deceased. Some states have estate tax, some have inheritance tax, and Maryland has both.

Twelve states plus Washington DC have estate taxes: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Exemptions range from $1 million (Oregon, Massachusetts) to $13.61 million (Connecticut). Most have progressive rates up to 12-20%.

Five states have inheritance taxes: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa repealed its inheritance tax effective 2025. Rates and exemptions vary by beneficiary relationship, with spouses typically fully exempt and distant relatives or unrelated beneficiaries paying the highest rates.

Yes, several strategies can reduce death taxes: lifetime gifts using the annual exclusion ($18,000 per recipient in 2024), charitable bequests (fully deductible), marital deduction for spouses, generation-skipping trusts, and qualified personal residence trusts. Consult an estate planning attorney for strategies appropriate to your situation.

The unlimited marital deduction allows spouses to inherit any amount from each other without paying estate or inheritance tax (in most states). This applies to both federal estate tax and state death taxes. However, this only defers taxes until the surviving spouse dies, when their estate may owe tax on the combined assets.