Inheritance tax in the US is generally not paid by most beneficiaries, as federal estate tax only applies to estates exceeding $13.99 million in 2025, and only a few states impose inheritance taxes.
For expats, foreigners, residents, and non-residents, actual tax exposure depends on estate size, asset type, state law, and the beneficiary’s relationship to the deceased.
This article covers:
- What are the inheritance tax rules in the US?
- How much can you inherit without paying taxes in the USA?
- How many percent is inheritance tax in the US?
- Does a beneficiary pay taxes on their inheritance?
- How to lower inheritance tax?
Key Takeaways:
- Federal estate tax applies only above a high exemption threshold.
- Most US states do not levy inheritance tax.
- Beneficiaries’ tax liability depends on state laws, residency, and asset type.
- Careful planning can reduce or defer inheritance taxes legally.
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The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.
What are the rules for inheritance in the USA?
Assets in the USA are inherited according to a valid will if one exists, or under state intestacy rules if there is no will.
Inheritance rules in the US are governed by a combination of federal estate tax laws, state inheritance rules, and probate regulations.
If a will exists, assets are distributed according to its instructions, subject to any applicable federal or state taxes.
Without a will, estates follow intestate succession rules, which generally favor spouses, children, and other close relatives.
Certain assets, such as jointly held property, life insurance, and retirement accounts, may pass outside of probate but can still have tax implications.
What are the inheritance tax laws in the US?
The United States does not impose a uniform federal inheritance tax.
Instead, the federal government imposes an estate tax on estates exceeding a high exemption threshold; for 2025, the federal estate and gift tax exemption is $13.99 million per individual.
Only a very small fraction of estates reach this level and therefore are subject to federal estate tax.
In addition to the federal system, a handful of states levy their own inheritance taxes, which are paid by beneficiaries rather than the estate itself.
As of 2025, the states that impose inheritance tax include:
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
Iowa’s inheritance tax has been fully repealed beginning January 1, 2025.
Inheritance tax rates and exemptions at the state level vary based on the beneficiary’s relationship to the deceased, with spouses and children typically receiving preferential treatment or full exemptions.
Non-resident beneficiaries may be subject to US estate tax on US-situated assets, including real estate, investments, and business interests, even if they live outside the US.
Careful planning is important for expats and foreigners to minimize unexpected tax exposure.
How much inheritance tax do you pay in America?
Federal estate tax in the US applies only to estates exceeding the threshold, and estates above that threshold pay tax ranging from 18% up to 40% on the amount over the exemption.
When it comes to state inheritance taxes, only a handful of states impose them, and rates depend on the beneficiary’s relationship to the deceased:
- In Kentucky, top rates can reach around 16%
- In Maryland up to 10%;
- In Nebraska up to about 15%
- In New Jersey up to about 16%
- In Pennsylvania up to about 15%
Close relatives such as spouses, children, and sometimes other lineal heirs are often exempt or pay reduced rates under state inheritance tax systems.
Distant relatives or unrelated beneficiaries may face higher rates within those ranges.
How much can you inherit in the US tax free?
You can inherit up to $13.99 million per person in 2025 without triggering US federal estate tax, provided the total estate does not exceed that threshold.
Spouses benefit from an unlimited marital deduction, allowing assets to pass between spouses free of federal estate tax, and married couples can effectively shelter up to $27.98 million with proper estate planning.
At the state level, tax-free inheritance amounts vary widely.
Many states impose no inheritance tax at all, while states that do typically exempt spouses and close family members or apply reduced rates based on the beneficiary’s relationship to the deceased.
How to reduce the amount of inheritance tax in the US?
You can reduce US inheritance tax by lowering the value of your taxable estate through gifting, trusts, charitable donations, or spousal transfers.
Common strategies include:
1. Lifetime gifting: Giving away assets while alive reduces the value of the taxable estate.
2. Trusts: Certain types of trusts can shelter assets from federal estate tax.
3. Charitable donations: Gifts to qualified charities lower the taxable estate.
4. Spousal deductions: Transfers to a spouse are generally exempt from federal estate tax.
For expats and non-residents, careful planning of US-situated assets is essential to prevent unexpected estate taxes and maximize tax efficiency.
Do beneficiaries have to pay taxes on inheritance in the US?
Beneficiaries usually do not pay inheritance tax in the US, because any federal estate tax is paid by the estate before assets are distributed.
State-level inheritance taxes are an exception in a few states, where certain beneficiaries may be liable depending on their relationship to the deceased.
Some inherited assets can still generate taxable income:
- Retirement accounts (IRAs, 401(k)s) are subject to income tax when distributions are taken by the beneficiary.
- Investments that produce dividends, interest, or capital gains after inheritance are taxable under normal income or capital gains rules.
Planning strategies, such as using trusts or gifting, can help reduce income tax or state-level tax burdens for beneficiaries.
Conclusion
Inheritance in the US is largely favorable for most beneficiaries, thanks to the high federal estate tax exemption and limited state inheritance taxes.
Even so, careful planning is essential, especially for larger estates, non-residents, and expats with US-based assets.
Understanding federal thresholds, state rules, and the tax implications of specific asset types ensures that heirs can receive their inheritance efficiently and minimize any unexpected tax obligations.
FAQs
What are the three rules of inheritance?
Inheritance in the US is guided by three main principles: a valid will or estate plan directs asset distribution, assets without a will follow state intestacy laws, and tax liabilities depend on federal and state regulations as well as the type of asset inherited.
What are the two main types of inheritance?
Inheritance in the US falls into two main categories: probate inheritance and non-probate inheritance.
Probate inheritance includes assets distributed through the court system according to a will or intestacy rules.
Non-probate inheritance, which covers assets that pass outside of probate, such as jointly held property, life insurance, or retirement accounts.
How much tax will I pay on a $100,000 gift?
In 2025, you would pay $0 federal gift tax on a $100,000 gift because the first $19,000 is excluded, and the remaining $81,000 counts against your $13.99 million lifetime exemption.
Tax is only owed if your total lifetime taxable gifts exceed that exemption.
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