NOTE: State laws change frequently and the following information may not reflect recent changes in the laws. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
Currently the District of Columbia and only a handful of states collect a state estate tax, the six states listed below collect a state inheritance tax, and two states collect both - Maryland and New Jersey.
Inheritance Taxes vs. Estate Taxes
So what's the difference between an inheritance tax and an estate tax? While at first glance it may appear to just be semantics since both types of taxes are collected as the result of someone's death, an inheritance tax is definitely not the same as an estate state. An inheritance tax is based on who receives a deceased person's property and how the beneficiary is related to the deceased person, while an estate tax is based on the value of the deceased person's estate and not on who gets what.
Refer to the State Estate Tax and Exemption Chart for information about the jurisdictions that collect estate taxes at the state level and their past and current state estate tax exemption amounts.
Push to Repeal State Death Taxes
Lately both state estate taxes and state inheritance taxes have been on the chopping block: Ohio's estate tax has been repealed effective January 1, 2013, Tennessee's estate tax will be repealed effective January 1, 2016, and Indiana's inheritance tax, which was supposed to be phased out by January 1, 2022, has ended up being retroactively repealed to January 1, 2013.
During 2012 initiatives were floated to repeal Nebraska's inheritance tax and North Carolina's estate tax, but nothing happened on those fronts; however, in 2013 a new initiative is underway to repeal North Carolina's estate tax. On November 6, 2012, Ballot Measure 84, which would have repealed Oregon's estate tax by January 1, 2016, was defeated by a margin of 54% in favor of keeping the estate tax vs. 46% in favor of getting rid of it.
Below is a chart that summarizes the details of the current laws that govern inheritance taxes in the six states that collect them.
*With regard to life insurance, in general life insurance that is payable to a living beneficiary is not included, but life insurance that is payable to the deceased person or the deceased person's estate is included.
**As mentioned above, Indiana's inheritance tax has been repealed effective January 1, 2013. Thus, the information in the chart below refers to deaths that occurred in 2012 and prior years.
Inheritance Tax Chart
|State||Are Spouses Exempt?||Are Descendants Exempt?||Are Domestic Partners Exempt?||*Is Life Insurance Included?||Tax Rate||Tax Form||Due Date|
|**Indiana||Yes||No||No||No||1% to 20%||Form |
|9 months after death|
|Iowa||Yes||Yes||No||No||5% to 15%||Form |
|Last day of ninth month after death|
|Kentucky||Yes||Yes||No||No||4% to 16%||Form 92A200, 92A202, or 92A205||18 months after death|
|Nebraska||Yes||No||No||No||1% to 18%||Form 500||12 months after death|
|New Jersey||Yes||Yes||Yes||No||11% to 16%||Form |
IT-R or IT-NR
|8 months after death|
|Pennsylvania||Yes||No||No||No||4.5% to 15%||Form |
|9 months after death|