Inheritance Tax: How It Works, Rates

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What is inheritance tax?
Is there a federal inheritance tax?
Who is exempt from inheritance tax?
Iowa
- People who are exempt: A surviving spouse, parents, grandparents, great-grandparents, children, stepchildren, grandchildren, great-grandchildren and adopted descendants are not subject to tax.
- Other rules to know: No inheritance tax is levied if the value of the deceased's estate is deemed to be less than $25,000.
Kentucky
- People who are exempt: A surviving spouse, parents, children, grandchildren, siblings and half-siblings.
- Other rules to know: Other relatives may be exempt on up to $500 or $1,000 worth of inherited assets, depending on their relationship to the deceased. If inheritance taxes are paid within nine months of the decendent's death, a 5% discount may apply.
Maryland
- People who are exempt: A surviving spouse, parents, stepparents, grandparents, children, stepchildren and siblings.
- Other rules to know: Property worth $1,000 or less is exempt from tax.
Nebraska
- People who are exempt: A surviving spouse and certain descendants below the age of 22.
- Other rules to know: Other close relatives may be exempt on up to $40,000 to $100,000 worth of inherited assets, depending on their relationship to the deceased.
New Jersey
- People who are exempt: A surviving spouse, civil union partner, domestic partner, parents, grandparents, children, stepchildren, grandchildren and great-grandchildren.
- Other rules to know: Other close relatives may be exempt on up to $25,000.
Pennsylvania
- People who are exempt: A surviving spouse or a child below the age of 21.
- Other rules to know: If inheritance tax is paid within three months of the decedent's death, the tax is discounted by 5%.
How much is inheritance tax?
State | Inheritance tax rates |
---|---|
Iowa | 2% to 6%. No inheritance tax beginning in 2025. |
Kentucky | 4% to 16%. |
Maryland | 10%. |
Nebraska | 1% to 15%. |
New Jersey | 11% to 16%. |
Pennsylvania | 4.5% to 15%. |
Sources
Do you pay capital gains on inheritances?
How to avoid inheritance tax
- Many states don’t tax gifts. Keep in mind that gifts don’t have to be cash — stocks, bonds, cars or other assets count, too.
- You can take steps ahead of time to ensure beneficiaries are in the best situation possible. These estate-planning vehicles include living trusts, irrevocable trusts and grantor retained annuity trusts.
Inheritance taxes vs. estate taxes
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Article sources
- 1. Iowa Department of Revenue. Iowa Inheritance Tax Rates: 2024. Accessed Oct 22, 2024.
- 1. Iowa Department of Revenue. Iowa Inheritance Tax Rates: 2024. Accessed Jun 12, 2024.
- 3. Kentucky Department of Revenue. Inheritance & Estate Tax. Accessed Jun 12, 2024.
- 4. Maryland.gov. Inheritance Tax. Accessed Jun 12, 2024.
- 5. Nebraska Legislature. Nebraska Revised Statute 77-2004. Accessed Jun 12, 2024.
- 6. NJ Treasury. Inheritance Tax Rates. Accessed Jun 12, 2024.
- 7. Pennsylvania Department of Revenue. Inheritance Tax. Accessed Jun 12, 2024.