Taxes

Inheritance Tax vs. Estate Tax: What's the Difference?

Estate tax is paid by the estate of the deceased before assets are distributed, and only kicks in for federal estates over $13.99M in 2025. Inheritance tax is paid by the heir who receives the assets, and exists in only six states. The vast majority of U.S. heirs owe neither.

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Written by the Inherited Home Buyers editorial team· Reviewed by Editorial Tax Reviewer (Placeholder) (CPA)· Last updated 2026-05-25

What is estate tax?

A tax on the gross estate of the deceased, paid by the estate before distribution. Federal exemption is $13.99M per individual in 2025 (doubled for married couples via portability). Twelve states plus DC also levy state estate tax, mostly with much lower thresholds — Massachusetts and Oregon start at $1M and $1M respectively.

What is inheritance tax?

A tax on the heir, calculated based on the heir's relationship to the deceased and the value received. Only six states levy it: Iowa (phasing out), Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Spouses are always exempt; lineal descendants usually exempt or low-rate; non-relatives pay the most.

Which one applies to me?

Most heirs: neither. If the gross estate is under $13.99M and you live in (and the property sits in) a state without inheritance tax, you owe no inheritance-style tax at all. Capital gains tax on the eventual sale is a separate question — see our capital gains guide.

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Frequently asked questions

Estate tax is paid by the estate before distribution. Inheritance tax is paid by the heir after receipt. They are separate systems and can both apply, though most U.S. heirs owe neither.
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Related guides
State Inheritance Tax by State
State Estate Tax by State
This page is for general educational purposes only and is not tax advice. Tax outcomes depend on your specific facts and the year of the transaction. Always confirm with a licensed CPA or tax attorney before making decisions.
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