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The Inheritance Tax Calculator estimates the tax owed by a beneficiary who receives assets from a deceased person's estate. Unlike the estate tax (paid by the estate before distribution), inheritance tax is paid by the individual receiving the inheritance. Only six U.S. states currently impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Inheritance tax rates vary significantly based on two factors: the beneficiary's relationship to the deceased and the state. Close relatives (spouses and children) typically pay little or no inheritance tax, while distant relatives and unrelated persons may face rates up to 18%. Surviving spouses are exempt in all six states, and most states exempt children or tax them at very low rates.
This is distinct from the federal estate tax in several important ways: inheritance tax is a state-level tax (there is no federal inheritance tax), it is paid by the recipient (not the estate), and the rate depends on the relationship between the deceased and the beneficiary. Maryland is unique in having both an estate tax AND an inheritance tax.
Inheritance tax exemptions and thresholds vary by state and relationship class. Pennsylvania has no exemptions for most beneficiaries but exempts spouses and charities. Kentucky and New Jersey exempt lineal descendants (children, grandchildren). Iowa is phasing out its inheritance tax by 2025, with reduced rates in the interim.
Planning strategies to minimize inheritance tax include making lifetime gifts (most states don't tax gifts made before death), establishing trusts, purchasing life insurance (often exempt from inheritance tax), and relocating to a state without inheritance tax. Beneficiaries should understand their potential liability and plan accordingly.
The calculation: Inheritance Tax = (Inheritance Amount - Exemption) × Tax Rate. The tax rate is determined by your relationship to the deceased and your state. Rates used are simplified representative rates — actual rates may include progressive brackets in some states. Spouses are exempt in all inheritance tax states.
If the tax rate shows 0%, the combination of your relationship and state means no inheritance tax is owed. Pennsylvania is the only state that taxes children's inheritances (4.5%). If you receive assets in a state with no inheritance tax, you generally owe nothing regardless of relationship.
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A $500k inheritance from a sibling in Pennsylvania incurs $60k in tax.
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Children are exempt from inheritance tax in New Jersey.
A tax paid by the beneficiary who receives assets from a deceased person's estate. It differs from estate tax, which is paid by the estate itself. Only six U.S. states impose inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
No. The U.S. has no federal inheritance tax. The federal estate tax is paid by the estate, not the beneficiary. Inheritance tax exists only at the state level in six states.
Iowa (phasing out by 2025), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state with both estate and inheritance tax.
Yes. Surviving spouses are exempt from inheritance tax in all six states that impose it. This is the one universal exemption across all inheritance tax jurisdictions.
In most inheritance tax states, children and lineal descendants are exempt or pay 0%. Pennsylvania is the exception, taxing children's inheritances at 4.5%.
Estate tax is paid by the deceased's estate before distribution. Inheritance tax is paid by each beneficiary after receiving their share. Estate tax rates don't depend on relationship; inheritance tax rates do.
Strategies include making lifetime gifts (typically exempt), using trusts, purchasing life insurance (often exempt), leaving assets to exempt beneficiaries (spouse, charity), or the deceased relocating to a non-inheritance-tax state.
Yes. Iowa is phasing out its inheritance tax, with rates reduced to zero for deaths occurring on or after January 1, 2025.
It varies by state. Pennsylvania exempts life insurance payable to named beneficiaries. Other states may include insurance proceeds in the taxable inheritance. Check your specific state's rules.
In states with inheritance tax, beneficiaries or the estate executor typically must file a return. In Pennsylvania, Form REV-1500 is due within 9 months of death. Filing requirements vary by state.
Roboculator Team
The Roboculator Team explains calculations, planning tools, and practical formulas in clear language for real-life situations.
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