WFCN – Many Americans also have to pay various state taxes in addition to federal taxes. While some governments do not impose income taxes, every state has some kind of revenue-generating levies, ranging from property and sales taxes to Social Security taxes.
Although estate taxes were previously levied by every state, they started to disappear in 2001 due to new laws that altered the federal and state estate tax systems.
Only 17 states still levy estate or inheritance taxes, along with the District of Columbia. Here are the states that allow and prohibit estate or inheritance taxes, along with the associated costs.
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States Without Inheritance or Estate Taxes
The following states exclude you from paying separate inheritance and estate taxes:
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Delaware
- Florida
- Georgia and Idaho
- Indiana
- Kansas
- Louisiana
- Michigan
- Mississippi
- Missouri
- Montana
- Nevada
- New Hampshire
- New Mexico
- Carolina
- North Dakota
- Ohio
- Oklahoma
- Carolina
- South Dakota
- Tennessee
- Texas
- Utah, Virginia
- West Virginia
- Wisconsin
States That Charge Estate or Inheritance Taxes: Wyoming
The following 17 states and the District of Columbia are the only ones that continue to impose estate or inheritance taxes on its citizens:
- Washington
- Oregon
- The District of Columbia
- Nebraska
- Iowa
- Minnesota
- Illinois
- Kentucky
- Pennsylvania
- Maine
- Vermont
- New York
- Massachusetts
- URI
- Connecticut
- New Jersey
- Maryland
- Hawaii
What Separates Inheritance Taxes from Estate Taxes?
Despite being categorized as “death” taxes, inheritance and estate taxes operate in distinct ways.
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Inheritance taxes are paid by beneficiaries, and solely on the portion they receive individually, as opposed to estate taxes, which are assessed on a decedent’s assets and cover the entire estate.
How Much Will Estate or Inheritance Taxes Cost You?
The maximum rate of federal estate taxes is 40%; however, most estates are exempt from paying any taxes at all due to a substantial exemption.
Federal estate taxes will not apply to the first $13.61 million of a single decedent’s estate in 2024; for married couples, this exemption will increase to $28.22 million. Above those thresholds, the first $1 million is subject to taxation at rates ranging from 18% to 39%; excess sums quickly reach the maximum tax threshold of 40%.
Even while state estate and inheritance taxes are substantially lower than federal rates, they nevertheless have a substantial impact. Hawaii and Washington have the highest state tax rates, both at 20%. There are 10% to 16% estate and inheritance taxes in other states.
The Final Word
It’s essential to speak with an estate planning attorney as soon as possible if you think you might have to pay estate or inheritance taxes because they can be complicated.
Thankfully, the majority of estates and bequests are far less than the threshold required to incur taxes, especially at the federal level. However, you should be aware of any state-specific levies that can apply, as these might happen at much lower amounts.