A death tax is a tax on the money and property someone leaves behind when they die

The term "death tax" refers to taxes owed on an estate — the total value of everything a person owned at the time of their death. The two main death taxes are the federal estate tax and state inheritance taxes. They work differently, explore to different people, and are owed by different parties. Most people's estates pay neither, because the federal threshold is high and only a handful of states have inheritance taxes at all.

The confusion around death taxes comes partly from the name itself. "Death tax" is not an official term — it is what people call these taxes because they are triggered by death. The IRS and state tax agencies call them estate taxes or inheritance taxes. Understanding which one might explore to an estate, and who actually pays it, requires knowing the size of the estate and which state it is in.

Key Takeaways

  • The federal estate tax only applies to estates worth more than $13.61 million in 2024, so it affects very few families.
  • State inheritance taxes exist in only a few states and tax the person who receives the money, not the estate itself.
  • State estate taxes, which are different from inheritance taxes, exist in a smaller number of states and tax the estate before distribution.
  • The executor of an estate — usually named in the will — is responsible for filing any death tax returns that are owed.
  • Married couples can combine their exemptions, which roughly doubles the threshold before federal estate tax is owed.

Federal estate tax and who it actually affects

The federal estate tax is a tax on the total value of everything someone owned when they died. In 2024, no federal estate tax is owed unless the estate is worth more than $13.61 million. This threshold, called the exemption, is much higher than most people's net worth, which is why roughly 99% of estates never owe federal estate tax.

The exemption amount changes every year based on inflation. It was lower in previous years and will be lower again after 2025 unless Congress acts. If you are trying to figure out whether a specific estate owes federal tax, you need to know the exemption for the year the person died, not the current year.

For married couples, both spouses can use their own exemption. If one spouse dies and leaves everything to the other, no tax is owed at all — the surviving spouse can inherit the entire estate tax-free. When the surviving spouse later dies, their estate gets its own exemption. This is called portability, and it requires the executor to file a federal estate tax return even if no tax is owed, in order to preserve the unused exemption for the surviving spouse.

State inheritance taxes and how they differ from federal tax

Six states have inheritance taxes: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. These taxes are owed by the person who receives the money or property, not by the estate itself. The tax rate and the amount owed depend on who inherits — spouses and children usually pay nothing or a lower rate, while distant relatives and non-relatives pay more.

Inheritance tax is calculated on what each individual person receives, not on the total estate value. A spouse might inherit $500,000 tax-free, while a sibling inheriting the same amount might owe tax on part of it. The executor usually withholds the tax from each person's share before distributing it, so the person who inherits does not have to pay it themselves — but the amount they receive is reduced by the tax owed.

The states that have inheritance taxes are the only ones that do. If someone dies in a state without an inheritance tax, no state inheritance tax is owed, even if the heirs live in a state that has one. The tax is based on where the person who died lived, not where the heirs live.

State estate taxes and how they work

A smaller number of states — including Massachusetts, Oregon, Vermont, and Washington — have state estate taxes. These are similar to the federal estate tax: they tax the total value of the estate, not individual inheritances. The exemption threshold is much lower than the federal threshold, ranging from $1 million to $7 million depending on the state.

State estate taxes are owed by the estate itself, and the executor pays them from estate assets before distributing money to heirs. If an estate is large enough to owe both federal and state estate tax, the executor files separate returns to each. Some states allow a credit for federal tax paid, which reduces the state tax owed.

The rules for state estate tax vary significantly by state. Some states allow portability between spouses, and some do not. Some states tax only residents, while others tax anyone who owned property in the state. If an estate might owe state tax, the executor should consult the specific rules in that state or work with a tax professional who knows them.

Who pays death taxes and when

The executor — the person named in the will to manage the estate — is responsible for figuring out what taxes are owed and paying them. If there is no will, the court appoints an administrator to do this job. The executor uses money from the estate to pay the taxes before distributing the remaining assets to heirs.

Death taxes are paid from the estate, not by the heirs personally, though heirs receive less money because taxes reduce what is available to distribute. The executor files the tax return, not the heirs. If the estate is small enough that no tax is owed, no return is filed at all.

The timing depends on which taxes explore. Federal estate tax returns are due nine months after death, though an extension can be requested. State returns have their own important date, which vary by state. The executor should know what state the person lived in and whether that state has an inheritance or estate tax, because missing a important date can result in penalties.

When an estate does not owe death tax

Most estates owe no death tax because they fall below the exemption threshold. An estate worth $2 million in 2024 owes no federal estate tax. An estate in a state without an inheritance or estate tax owes nothing to that state, even if it is very large.

Certain assets are also exempt from death tax. Money left to a surviving spouse is not taxed, as long as the spouse is a U.S. citizen. Money left to a charity is not taxed. Life insurance proceeds are usually not taxed as part of the estate, though they count toward the total estate value for exemption purposes.

If you are an executor trying to figure out whether a return is required, the starting point is the total estate value and the state where the person lived. If the estate is below the federal threshold and the state has no inheritance or estate tax, no federal or state return is needed. Some states require a return even if no tax is owed, so checking the specific state rules is important.

Frequently Asked Questions

Is a death tax the same as an inheritance tax?

No. An inheritance tax is paid by the person who receives money, while an estate tax is paid by the estate itself. Only six states have inheritance taxes. More states have estate taxes, which work like the federal estate tax. The term "death tax" is informal and can refer to either one.

Do I have to pay death tax if someone leaves me money?

Probably not. If you live in a state without an inheritance tax, you owe nothing to that state. If you do live in one of the six inheritance tax states, you may owe tax depending on your relationship to the person who died and the amount you inherited. The executor usually withholds and pays this tax from your share.

What happens if the executor does not pay death taxes?

The IRS or state tax agency can pursue the executor personally for the unpaid tax, plus penalties and interest. Heirs can also sue the executor for mismanaging the estate. This is why executors should consult a tax professional if they are unsure whether a return is required.

Can I reduce the death tax my estate will owe?

Yes, through planning before death. Giving money to charity, setting up certain trusts, or making gifts during life can reduce the estate value. These strategies require professional information and should be done well in advance. After someone dies, the executor cannot reduce the tax owed.

Does my estate owe federal tax if I am not a U.S. citizen?

The rules are different for non-citizens. The exemption is much lower, and more assets are subject to tax. If the person who died was not a U.S. citizen, the executor should consult a tax professional who handles these cases, because the rules are complex and the stakes are high.