Inheritance Tax

An “inheritance tax” is tax paid by an heir on stuff they inherit after someone else dies. It’s also called a “death tax,” which we’ll go ahead and file in the Morbid Yet Accurate category, and how much we could end up paying depends on where we live, where the dead person lived if we inherited property, and what our relationship to that person was.

The federal government doesn’t do inheritance taxes. Neither do most states. In fact, the only six that do are Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. This doesn’t mean we won’t pay any sort of taxes on what we inherit if we live elsewhere—an inheritance tax is a completely separate animal from an estate tax. But what it does mean is that, if we live in one of those six states, we’re probably going to end up paying additional taxes on what we inherit, unless we're a surviving spouse or, in some cases, a surviving sibling, child, or grandchild.