No, estate and inheritance taxes are not the same. See who pays what
No, estate and inheritance taxes are not the same. See who pays what
Medora Lee, USA TODAYSat, February 28, 2026 at 11:03 AM UTC
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While Grim Reaper guides you to the afterlife, Uncle Sam will be escorting your heirs to the IRS.
Death can be a tax-triggering event, with two in particular you should be aware of: the estate tax and inheritance tax. Many people think they’re the same, but they aren’t.
The estate tax is levied on the things the deceased owns or has certain interests in when they die and is paid by the estate. The inheritance tax is paid by heirs.
The federal government has an estate tax only, and the threshold is high so most people don't have to worry about it too much. However, states can have one or both with varying thresholds and rules, or none, which makes death taxes even more confusing.
Below is what you so you can plan for them. It'll save your loved ones from confusion on top of grief and protect their inheritances.
What is the difference between inheritance tax and estate tax?
◾ Estate tax is "a tax on your right to transfer property at your death," the IRS says. They're paid by the estate of the person who died before assets are distributed.
◾ Inheritance tax is levied on someone who’s inherited money, property, or other assets. It only applies when the person who dies and passes on assets lived in one of the states that have an inheritance tax. It's not dependent on where the beneficiary lives.
WASHINGTON - JUNE 08: A member of College Republicans National Committee dresses as Grim Reaper as he marches on Capitol Hill to call on the Senate to eliminate the death tax June 8, 2006 in Washington, DC. A vote in effort to repeal the death tax permanently was failed at the Senate. (Photo by Alex Wong/Getty Images)Who levies the estate tax?
The federal government levies this tax, but a dozen states and the District of Columbia do too.
Federal tax rates range between 18% and 40%, depending on the amount above the $13.99 million threshold, or exemption amount, per person in 2025 or $15 million in 2026. For each tax tier, you pay a base tax charge and an additional marginal rate.
Most people probably won’t have to pay these taxes because thresholds are high. In 2023, for example, only 9,024 federal estate tax returns were filed, IRS data show. Of those, only about 40% were taxable but the revenue garnered was $44.4 billion.
State estate taxes, though, may be a different story. Exemption levels and the top tax rates are usually much lower than the federal government’s, making them easier to hit, said Sam Tutko, vice president of Miser Wealth Partners.
The dozen states plus the District of Columbia that have an estate tax are:
Connecticut
District of Columbia
Hawaii
Illinois
Maine
Maryland
Massachusetts
Minnesota
New York
Oregon
Rhode Island
Vermont
Washington
Who levies an inheritance tax?
Only five states have an inheritance tax.
Tax rates vary depending on the state but range between less than 1% to as high as 16%. Rates depend on the size of your inheritance, state tax laws and your relationship with the deceased.
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Generally, the closer you are to the deceased, the less likely you’ll have to pay this tax. Spouses are always exempt from paying inheritance tax, and immediate family members like children, and parents also are often exempt or pay a lower rate.
In 2025, these states had an inheritance tax:
◾ Kentucky
◾ Maryland
◾ Nebraska
◾ New Jersey
◾ Pennsylvania
Why do you need to watch Maryland?
Maryland is the only state to impose both an estate tax and an inheritance tax.
How can you avoid these taxes?
The best way to avoid the inheritance tax is to manage assets before death. To eliminate or limit the amount of inheritance tax beneficiaries might have to pay, consider:
◾ Giving away some of your assets to potential beneficiaries before death. Each year, you can gift a certain amount to each person tax-free. In 2025 and 2026, that annual gift exclusion is $19,000. These gifts are separate and in addition to your 2025 lifetime $13.99 million estate tax exemption ($15 million in 2026).
◾ Moving to a state without an inheritance and estate tax. Federal estate tax may still be applicable though if your estate exceeds the exemption threshold.
◾ Setting up an irrevocable trust. You give up some control over the assets because the trust becomes the official owner, and you can’t change or cancel it. But no trust assets transfer upon death, so no estate or inheritance taxes are charged. Assets you think will appreciate are particularly good candidates for a trust because “the appreciation escapes tax,” said Scott Goldberger, principal of estate and trust at accounting firm Kaufman Rossin.
What if I can’t avoid the inheritance tax?
If, for some reason, you can’t avoid the inheritance tax but your heirs will be short on cash to pay (the bill usually is due within several months), consider buying a small, term life insurance policy, which has a death benefit that can cover the tax bill, said Dimitri Pan, wealth adviser at financial services firm Charles Schwab.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
This article originally appeared on USA TODAY: Estate and inheritance taxes. Which might you owe?
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