Estate tax vs inheritance tax
An estate tax is charged on everything the deceased left; an inheritance tax is charged on each person who receives a share. Enter an estate, a state and the heirs to see which of the two applies, or both.
- Estate tax jurisdictions
- 13
- Inheritance tax states
- 5
- Both
- Maryland
- Federal
- estate tax only
Death taxes on this estate in 2026
$700,000
10.0 % of the estate; 2 heirs at $3,500,000 each.
| Maryland estate tax | $0 |
| Maryland inheritance tax, each niece or nephew | $350,000 |
| Federal estate tax | $0 |
| Left to heirs and spouse after taxes | $6,300,000 |
Federal: $6,300,000 taxed against an exclusion of $15,000,000. Estimate on 2026 rules, not legal or tax advice.
Compiled by Radif Partners · How we calculate · figures read on the state revenue department, the statute and irs.gov · not legal or tax advice
The two taxes look alike on a family's bank statement, since both are paid after a death, but they are built differently. An estate tax is charged on the estate as a whole, after debts and deductions, once it crosses a threshold: $15,000,000 for the federal tax in 2026, from $1,000,000 in Oregon to $15,000,000 in Connecticut for the 13 state-level jurisdictions. The executor files one return and pays from the estate. An inheritance tax is charged on each beneficiary's share, at a rate set by the relationship to the deceased, often from the first dollar and whatever the size of the estate; it exists in 5 states. A spouse is exempt from both everywhere. Pennsylvania takes $135,000 from $3,000,000 left to two children, while Massachusetts takes $82,400 in estate tax from the same estate. Maryland applies both and lets the inheritance tax reduce the estate tax.
Side by side
| Estate tax | Inheritance tax | |
|---|---|---|
| Charged on | The whole taxable estate | Each beneficiary’s share |
| Threshold | Yes, a single exemption for the estate | Per heir, often none |
| Rate depends on | Size of the estate | Relationship of the heir |
| Spouse | Deducted (marital deduction) | Exempt in all five states |
| Children | Taxed only if the estate is over the threshold | Exempt except in Pennsylvania and Nebraska |
| Return filed by | The executor | The executor or personal representative, sometimes the heir |
| Levied by | Federal government and 13 jurisdictions | 5 states |
The federal government has only an estate tax. The 13 jurisdictions with an estate tax are Connecticut, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington; the 5 with an inheritance tax are Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania. Maryland appears on both lists.
The same families, seven situations
Each line is an unmarried resident of the state who leaves the estate in two equal shares. The engine applies the state's estate tax, its inheritance tax per heir, and the federal estate tax with state death taxes deducted.
| Situation | State estate tax | Inheritance tax, both heirs | Federal estate tax |
|---|---|---|---|
| Pennsylvania, $3,000,000 to two children | $0 | $135,000 | $0 |
| New Jersey, $3,000,000 to two nephews | $0 | $466,000 | $0 |
| New York, $8,000,000 to two children | $773,200 | $0 | $0 |
| Massachusetts, $3,000,000 to two children | $82,400 | $0 | $0 |
| Maryland, $7,000,000 to two nephews | $0 | $700,000 | $0 |
| Maryland, $7,000,000 to two children | $320,000 | $0 | $0 |
| Florida, $8,000,000 to two nephews | $0 | $0 | $0 |
The lines show the main practical difference. In an inheritance tax state the size of the estate hardly matters and the family tree decides: the Pennsylvania children pay on every dollar of a $3,000,000 estate that Florida, New Jersey or the federal government would not tax at all, and the New Jersey nephews pay far more than children would. In an estate tax state the family tree hardly matters and the size decides: the Massachusetts children pay because $3,000,000 is above the state's $2,000,000 threshold, and they would pay the same as nephews. The New York line adds a third effect: an estate tax state can tax a large estate heavily even when the heirs are the closest relatives, because the exemption, not the relationship, is the only gate.
Estate tax, inheritance tax, or both?
Death taxes on this estate in 2026
$700,000
| Maryland estate tax | $0 |
| Maryland inheritance tax, each niece or nephew | $350,000 |
| Federal estate tax | $0 |
| Left to heirs and spouse after taxes | $6,300,000 |
Maryland, the state with both
Maryland charges 10 % inheritance tax on shares going to heirs outside its exempt list, and an estate tax above $5,000,000. Form MET 1 then subtracts the Maryland inheritance tax paid from the estate tax, on line 14a (Form MET 1). The result is that the family pays roughly the larger of the two. Left to two nephews, a $7,000,000 estate owes $700,000 of inheritance tax and $0 of estate tax after the credit; left to two children, it owes no inheritance tax and $320,000 of estate tax. The detail is on Maryland inheritance tax and Maryland estate tax.
How the federal tax treats state death taxes
Both kinds of state tax reduce the federal one. Section 2058 of the Internal Revenue Code lets the estate deduct "any estate, inheritance, legacy, or succession taxes actually paid to any State or the District of Columbia" from the federal gross estate, and the Form 706 instructions apply the deduction on line 3b (26 U.S.C. 2058). The deduction only matters for estates above the federal exclusion of $15,000,000, which is why the federal column above is zero in most lines.
Where the deceased lived, and where the property is
Both taxes follow the deceased, not the heirs: the state of residence taxes the estate or the shares, and a state where the deceased owned real estate taxes that property too, with its estate tax, its inheritance tax or both. An heir's own state of residence never matters. That is why a move by the parent can change the bill and a move by the child cannot; the options and their limits are on moving to avoid estate tax, and property in two states on property in another state.
Planning reflexes that work for one tax and not the other
Because the two taxes are triggered by different facts, a technique that removes one can leave the other untouched. Leaving more to a spouse defers an estate tax until the second death but changes nothing for an inheritance tax, where the spouse was already exempt. Splitting an estate among more heirs does not lower an estate tax computed on the whole, but in Nebraska, Kentucky and New Jersey's Class C it multiplies the per-heir exemptions. Life insurance paid to a named beneficiary is outside the inheritance tax in Pennsylvania, New Jersey, Kentucky and Maryland, yet it stays in the federal gross estate, and in the states that start from it, when the deceased owned the policy. These are descriptions of how the rules interact, not recommendations; an estate attorney licensed in the state concerned applies them to a family.