What Taxes Apply to My Inheritance, and When Will I Receive It?

5 states charge a state inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. The rate and exemption depend on the beneficiary's relationship to the deceased — spouses are typically exempt, children and parents usually face lower rates or large exemptions, and distant relatives or unrelated heirs pay the highest rates. The remaining states have no inheritance tax at all. See state-by-state rates with our Estate & Inheritance Tax Calculator.

Estate tax is paid by the estate before assets are distributed — the executor files the return and pays out of estate funds. Inheritance tax is paid by the beneficiary after receiving the inheritance. The federal government charges an estate tax on estates above the federal exemption. Some states charge a state estate tax, a smaller group charges an inheritance tax on the beneficiary, and at least one state (Maryland) charges both.

No. The IRS does not treat inherited money, real estate, or personal items as income, so you don't report them on your federal return when received. Two exceptions: inherited retirement accounts (401k, traditional IRA) are taxable as ordinary income when distributed, and any investment earnings after the date of death are taxable. For inherited property, capital gains use a stepped-up cost basis — the date-of-death value, not what the deceased originally paid.

The timeline varies based on the estate plan and assets involved. Assets that bypass probate — life insurance and retirement accounts with named beneficiaries — pay once the institution processes the claim. Trust distributions take 1-13 months in the 22 states that set a trust creditor-claims window. Probate estates usually take 6-18 months, sometimes longer for complex estates or contested wills.