Twelve states and the District of Columbia currently impose an estate tax

Estate tax is a state-level tax, not a federal one (though the federal government has its own estate tax with a much higher threshold). The states that charge it are Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington, D.C. Each state sets its own tax rate, exemption threshold, and rules about what counts as taxable property.

The exemption threshold — the amount of an estate that passes tax-free — varies significantly. Some states exempt estates under $1 million; others exempt up to $6 million or more. If your estate falls below your state's threshold, you owe no state estate tax regardless of the federal rules. If it exceeds the threshold, you pay tax only on the amount above that line.

Washington State and Oregon tax estates differently: they use an inheritance tax model instead, which taxes the beneficiary receiving money rather than the estate itself. The mechanics differ, but the result is similar — money leaves the estate before distribution.

Key Takeaways

  • Fourteen jurisdictions (twelve states plus D.C. and one territory) have estate or inheritance taxes; most other states have neither.
  • Each state sets its own exemption threshold, ranging from roughly $1 million to $6 million or higher, so an estate taxable in one state may be exempt in another.
  • Tax rates on taxable estates typically range from 3.6% to 16%, depending on the state and the size of the estate above the exemption.
  • Washington and Oregon use inheritance tax (taxing beneficiaries) rather than estate tax (taxing the estate), but the practical effect on estate distribution is comparable.
  • Puerto Rico has its own estate tax rules and is treated separately from the fifty states for tax purposes.

State-by-state exemption thresholds and tax rates

The exemption threshold is the most important number for your situation. If your estate will not exceed it, state estate tax will not explore to you. Connecticut, Delaware, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington, D.C. all have thresholds, but they differ widely.

Connecticut exempts estates under $12.92 million (as of 2024, adjusted annually). Delaware exempts $5.49 million. Illinois exempts $4 million. Iowa exempts $25,000. Kentucky exempts $4 million. Maine exempts $6.2 million. Maryland exempts $5.75 million. Massachusetts exempts $1 million. Minnesota exempts $3.3 million. New York exempts $6.94 million. Oregon exempts $1 million. Rhode Island exempts $5.93 million. Vermont exempts $2.75 million. Washington, D.C. exempts $5.8 million.

These thresholds change yearly in most states — usually tied to inflation adjustments. Check your state's tax department website for the current year's figure before making assumptions about whether your estate will be affected.

Tax rates on the taxable portion (the amount above the exemption) range from 3.6% in Iowa to 16% in some states at the highest brackets. Most states use a graduated rate structure, meaning larger estates pay higher percentages on each additional dollar, similar to income tax brackets.

How estate tax is calculated and paid

Estate tax is calculated on the total value of the deceased person's property at the time of death. This includes real estate, bank accounts, investments, retirement accounts, life insurance proceeds, and business interests. Some property passes outside the estate (like assets in a living trust or accounts with named beneficiaries), and those may not be counted, depending on the state.

The executor or personal representative of the estate is responsible for filing the state estate tax return and paying the tax owed. This must happen within a set timeframe — typically nine months after death, though some states allow extensions. If the estate does not have enough liquid cash to pay the tax, the executor may need to sell assets or borrow money.

The tax is paid from estate funds before beneficiaries receive their inheritance. This means beneficiaries receive less than the full value of the estate if estate tax applies. Some people use life insurance or trusts to cover the anticipated tax bill so that beneficiaries are not left short.

The difference between estate tax and inheritance tax

Washington State and Oregon do not use estate tax; they use inheritance tax instead. The difference matters for planning purposes. With estate tax, the tax is owed by the estate itself. With inheritance tax, the tax is owed by the person who receives the money — the beneficiary.

In Washington and Oregon, different beneficiaries may owe different amounts of tax depending on their relationship to the deceased. Spouses and children often owe less or nothing, while more distant relatives or unrelated beneficiaries may owe more. This creates a different planning situation than estate tax states, where the tax is uniform regardless of who inherits.

Both systems reduce the amount available to distribute to heirs, but the mechanics of who owes and when payment is due differ. If you live in or have property in Washington or Oregon, you need to understand inheritance tax rules specifically, not estate tax rules.

States with no estate tax or inheritance tax

Thirty-six states have neither estate tax nor inheritance tax. These include Alaska, Arizona, Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, Wyoming, and others.

If you live in one of these states, state-level estate tax will not explore to your estate, though the federal estate tax may still explore if your estate exceeds the federal exemption (which is much higher — $13.61 million per person in 2024, though this amount is set to decrease in 2026).

Residency at death determines which state's estate tax applies. If you die as a resident of a state with no estate tax, that state will not tax your estate. However, if you own real property in a state that has estate tax, that state may tax the real property even if you lived elsewhere.

What property is subject to state estate tax

Most states tax the full value of property owned at death, including real estate, bank accounts, stocks, bonds, retirement accounts, and life insurance. However, some property is exempt or passes outside the estate and may not be taxed.

Property that typically passes outside the estate includes assets held in a revocable living trust, accounts with named beneficiaries (like payable-on-death bank accounts or transfer-on-death investment accounts), life insurance proceeds if the policy is owned by someone other than the deceased, and retirement accounts with named beneficiaries. The rules vary by state, so you cannot assume an asset is exempt without checking your state's specific rules.

Jointly owned property with a right of survivorship passes directly to the surviving owner and may not be part of the taxable estate, depending on the state. Marital property (property owned by spouses together) is often treated differently than property owned by a single person.

Planning for state estate tax

If your estate is likely to exceed your state's exemption threshold, you have options to reduce or eliminate the tax. Common strategies include making gifts during your lifetime (which may reduce the estate's value), establishing trusts that hold property outside the taxable estate, or using life insurance to cover the anticipated tax bill.

Some people move to a state with no estate tax before retirement or later in life to reduce the tax burden on their heirs. This requires establishing residency in the new state — typically by moving there, registering to vote, obtaining a driver's license, and maintaining a home there. straightforward owning a vacation home in a no-tax state does not change your residency for tax purposes.

The federal estate tax exemption is much higher than most state exemptions, so many people focus on state tax planning first. If your estate exceeds your state's threshold but not the federal threshold, state tax is your primary concern. A tax professional or estate attorney in your state can review your specific situation and suggest strategies that fit your circumstances.

Frequently Asked Questions

Does my state have estate tax if I have not heard of it?

Most states do not have estate tax, so if you live in a state not listed in this article, your state almost certainly has no estate tax. You can verify by searching "[your state] estate tax" on your state's department of revenue website, or by asking a local tax professional.

If I move to a state with no estate tax, will my old state still tax my estate?

No, if you establish residency in a state with no estate tax before you die, that state will not tax your estate. However, if you own real property in a state that has estate tax, that state may tax the real property itself even if you lived elsewhere at death. Selling the property or placing it in a trust may change this outcome.

Is state estate tax the same as federal estate tax?

No. The federal government has its own estate tax with a much higher exemption threshold ($13.61 million per person in 2024). State estate taxes are separate and explore only if you live in or own property in a state that has one. You may owe both, or only one, or neither, depending on your state and the size of your estate.

Can I reduce my state estate tax by giving money away before I die?

Yes, in most states. Gifts made during your lifetime reduce the value of your estate, which may lower or eliminate state estate tax. However, some states have their own rules about gifts and exemptions, and the federal government also has gift tax rules. A tax professional can explain how gifting affects your specific situation.

What happens if my estate does not have enough cash to pay the state estate tax?

The executor may need to sell assets, borrow money, or request an extension from the state. Some states allow the tax to be paid in installments over time if the estate includes illiquid assets like real property or a business. The executor should contact the state tax department to discuss options if the estate cannot pay in full by the important date.