State Estate and Inheritance Taxes: The States That Still Tax Death
The Million Dollar Question: What is the single highest marginal state estate tax rate charged anywhere in the U.S. right now?
A) 12% B) 16% C) 20% D) 35%Read on for the answer.
In 2025, Washington State passed the highest state estate tax rate in American history. In 2026, it reversed itself. Most people have no idea either of those things happened, because state estate and inheritance tax law is one of the few areas of the tax code that genuinely does change year to year, state to state, while almost nobody is watching. This piece is the map: which states still tax estates, which tax heirs instead, which do both, which do neither, and the handful of mechanical quirks — like a tax that can apply to an entire estate rather than just the part over the limit — that catch people who assume their state works the way the federal government does.
What it is
There are three separate, often-confused systems in play, and most coverage blurs them together. The federal estate tax is one national system that applies no matter where you live: in 2026, under the One Big Beautiful Bill Act, the exemption rose to $15 million per person, indexed for inflation starting in 2027, according to the Tax Foundation. Above that threshold, the top federal rate is 40%. Most American estates never come close to it.
Layered on top, a state estate tax is a separate tax some states charge on an estate before it’s distributed to heirs — its own exemption, its own rate, assessed regardless of who inherits. As of October 2026, twelve states plus Washington, D.C. charge one: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington, per the Tax Foundation’s 2026 table.
A state inheritance tax is a different animal entirely: instead of taxing the estate as a lump sum, it taxes what each heir receives, with the rate depending on that heir’s relationship to the person who died. Five states still have one — Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Spouses and, in most of these states, children are exempt or taxed lightly; siblings, nieces and nephews, and unrelated heirs pay progressively more. Maryland is the only state in the country that charges both an estate tax and an inheritance tax on the same death.
Everyone else — more than thirty states, including California, Texas, and Florida — charges neither. Living in one of those states doesn’t exempt you from the federal tax, but it does mean the only estate or inheritance tax return anyone in your family will ever file is a federal one, and only if the estate clears $15 million.
Who it actually hits
The instinctive assumption is that this is a billionaire’s problem. The federal exemption makes that mostly true at the federal level — $15 million per person, nearly $30 million for a married couple who plan properly, excludes almost every American family. State exemptions are a different story, and several of them are dramatically lower. Oregon’s exemption is $1 million. Massachusetts’s is $2 million. Rhode Island’s sits at $1,838,056 for 2026, per the Tax Foundation table. None of those numbers require a private jet or a family office to clear.
A $1 million estate in Oregon isn’t exotic. It’s a paid-off house in a market that’s appreciated for twenty years, a 401(k) built over a career, and a life insurance payout — the ordinary accumulated assets of a long-tenured professional or a two-income household that never thought of itself as wealthy. That’s the real audience for this piece: not the ultra-wealthy readers who already have an estate attorney on retainer, but the much larger group of comfortably middle-class and mass-affluent households who are one state line away from owing a tax they’ve never heard of. The same household can also be one move away from a very different outcome: relocate from Oregon to Florida without updating an estate plan built around the old state, and the plan may be solving for a tax that no longer applies — or, run the move in reverse, ignoring a new state’s much lower threshold entirely.
Why the map looks the way it does
State estate taxes didn’t always require a state to do its own collecting. For decades, the federal government let estates claim a “state death tax credit” — a dollar-for-dollar offset against federal estate tax for whatever a state collected, which meant states could levy their own estate tax at essentially no net cost to the estate; the state got revenue the federal government was going to collect anyway. The 2001 federal tax law phased that credit out between 2002 and its full repeal in 2005, and a number of states that had quietly ridden the credit for decades suddenly had to decide, on their own, whether to keep an estate tax that would now cost their residents real money, or drop it. Some kept it. Many didn’t. That one federal decision, two decades old, is the reason the current map has holes in it that don’t track obviously with anything else — it isn’t that high-tax states uniformly kept an estate tax and low-tax states uniformly dropped one; Washington has no state income tax at all and still has the nation’s joint-highest estate tax rate.
None of this is static the way a sales tax rate feels static. The more recent churn is simpler: ordinary legislative back-and-forth. Washington raised its top estate tax rate to 35% in 2025 — a true outlier, higher than any state had ever charged and higher than the pre-1976 federal top rate — then rolled it back to 20% effective July 1, 2026 under Senate Bill 6347, signed by Gov. Bob Ferguson, according to Kiplinger and the bill’s own Senate sponsors. Massachusetts went the other direction in 2023, raising its exemption from $1 million to $2 million and fixing a quirk in its law that had been costing families money since long before anyone currently in the legislature took office. Iowa finished phasing out its inheritance tax entirely, confirming on its own Department of Revenue site that the tax “is not applicable for deaths occurring on or after 1/1/25.” These are not settled, permanent features of the tax code. They’re live political decisions, and the map shifts every legislative session.
How it actually works — and the cliff most people don’t know about
A normal estate tax, state or federal, works the way most people assume: it’s graduated, and it only applies to the amount above the exemption. If Oregon’s exemption is $1 million and an estate is worth $1.5 million, the tax applies to $500,000, not the full $1.5 million — a straightforward, excess-only calculation, per SmartAsset’s breakdown of Oregon’s 10%–16% graduated brackets.
New York works differently, and it’s the mechanism that trips up the most people. If a New York estate’s value exceeds the exemption by more than 5%, the estate loses the exemption entirely and the whole estate becomes taxable — not just the amount over the line, according to WealthSpire’s explanation of what’s informally called the “cliff.” Cross that 105% threshold and, in WealthSpire’s words, the estate is “subject to New York estate tax in their entirety — starting from dollar one.” An estate that’s barely over the line can end up paying tax on its entire value, while an estate that stays just under the line pays nothing. That five-percentage-point gap is one of the more consequential cliffs in American tax law, and it means New York estate planning sometimes focuses less on reducing an estate’s value and more on staying cleanly under a specific number.
Massachusetts used to have the same problem. Before a 2023 reform, Massachusetts taxed an entire estate once it exceeded $1 million, rather than just the amount in excess of $1 million — the Boston Bar Journal gives the example of a $1.05 million estate owing tax on the full $1.05 million rather than on the $50,000 over the line. The state fixed this in October 2023, raising the exemption to $2 million and adding a flat credit that, per the Journal, “eliminates this cliff effect by taxing assets that are over $2 million only.” Massachusetts estate tax today works the normal, excess-only way. The cliff is gone. A lot of estate-planning advice written before 2023 doesn’t know that yet.
Inheritance tax works on an entirely different axis: it’s not about the size of the estate, it’s about who’s receiving it. A surviving spouse is typically exempt everywhere that still has an inheritance tax. Children usually face low rates or outright exemption in most of the five states. The rates climb for more distant relatives — siblings, nieces, nephews — and climb further still for unrelated heirs, who in some of these states can face the maximum bracket on every dollar they receive, even a modest bequest from a friend or longtime caregiver with no exemption at all.
What it costs — the state-by-state table
Here is the full list, current as of the Tax Foundation’s October 2026 data:
States with an estate tax (exemption / top rate):
| State | Exemption | Top rate |
|---|---|---|
| Connecticut | $15,000,000 | 12% (flat) |
| Hawaii | $5,490,000 | 20% |
| Illinois | $4,000,000 | 16% |
| Maine | $7,160,000 | 12% |
| Maryland | $5,000,000 | 16% |
| Massachusetts | $2,000,000 | 16% |
| Minnesota | $3,000,000 | 16% |
| New York | $7,350,000 | 16% |
| Oregon | $1,000,000 | 16% |
| Rhode Island | $1,838,056 | 16% |
| Vermont | $5,000,000 | 16% |
| Washington | $3,000,000 | 20% |
| District of Columbia | $4,988,400 | 16% |
States with an inheritance tax (top rate range; exemptions vary by how closely related the heir is):
| State | Rate range | Notes |
|---|---|---|
| Kentucky | 0%–16% | Spouses and children exempt; more distant heirs taxed |
| Maryland | 0%–10% | Also has an estate tax — the only state with both |
| Nebraska | 0%–15% | Rate depends heavily on relationship class |
| New Jersey | 0%–16% | Close relatives (Class A) exempt |
| Pennsylvania | 0%–15% | No blanket exemption; spouses taxed at 0% |
Connecticut’s flat 12% stands out — it’s the only state that doesn’t graduate its estate tax rate by bracket. Washington and Hawaii share the highest top marginal rate in the country at 20%. And after Iowa’s repeal, the inheritance-tax list is down to five states — a list that was six as recently as last year. Rhode Island’s oddly specific $1,838,056 exemption is also worth noting on its own: unlike Oregon’s frozen $1 million, Rhode Island’s threshold is indexed and creeps upward with inflation each year, which is exactly the design choice Oregon’s critics point to when they argue Oregon’s number should move too.
Hidden costs and tradeoffs
A few mechanics make this more complicated than the headline numbers suggest. Unlike the federal exemption, which is portable between spouses — a surviving spouse can use any unused portion of their late spouse’s federal exemption — several state exemptions are not portable at all, meaning a couple who doesn’t plan around this can effectively lose half their combined state exemption on the first death.
Real estate adds another wrinkle: a non-resident who owns property in a state with an estate tax can owe that state’s estate tax on the value of that property alone, even if they never lived there and their total estate is far under the exemption where they actually reside. A retiree who moved from New York to Florida for tax reasons but kept a vacation home in the Hudson Valley hasn’t necessarily escaped New York’s estate tax — just shrunk their exposure to it.
And in cliff-exposed states, there’s a filing cost even when no tax ends up being owed: an estate that lands close to the threshold often needs a full valuation and a filed return just to demonstrate it stayed under the line, which is real legal and accounting expense for a family that may ultimately pay nothing. Inheritance tax has its own version of this trap. Pennsylvania charges its tax with no blanket exemption at all — every dollar an heir receives is potentially taxable from the first dollar, at a rate set by that heir’s relationship to the decedent — so a modest $20,000 bequest to a longtime caregiver or a close friend who isn’t a blood relative can land in a higher bracket than a much larger bequest to a direct descendant. The tax follows the relationship, not the generosity.
What people get wrong
That “no federal estate tax” means no estate tax at all. The $15 million federal exemption gets all the press. Twelve states plus DC disagree, at exemption levels as low as $1 million.
That every state estate tax works like the federal one. Most do — graduated, excess-only. New York’s cliff proves the exception matters: cross 105% of the exemption and the entire estate becomes taxable, not just the amount over the line.
That Massachusetts still has that same all-or-nothing cliff. It did, until October 2023. The exemption doubled to $2 million and a credit mechanism eliminated the cliff. A lot of secondhand advice hasn’t caught up.
That Oregon’s low exemption only catches wealthy families. At $1 million, unindexed for years, it reaches a paid-off suburban house plus retirement savings — exactly the kind of estate that doesn’t think of itself as subject to an “estate tax.”
That “estate tax” and “inheritance tax” are the same thing. They tax different things in different ways: one taxes the estate’s total value regardless of heir; the other taxes each heir based on their relationship to the decedent, regardless of total estate size. Maryland is the only state where both apply to the same death.
Bottom line
The Million Dollar Question, answered: C — 20%. Washington and Hawaii currently share the highest state estate tax rate in the country, both at 20%. The trap answer, D) 35%, was real — it’s the rate Washington actually charged for about a year, the highest state death tax rate in American history, before Senate Bill 6347 rolled it back to 20% effective July 1, 2026. That reversal is the cleanest illustration of the whole piece: this isn’t settled law anyone can learn once. Twelve states plus DC currently tax estates, five tax heirs directly, Maryland does both, more than thirty states do neither, and at least two of those rules changed meaningfully in the past three years. If an estate in your family is anywhere near a state threshold, the right move isn’t to remember a number from an article — it’s to check your specific state’s current exemption and rate before you need to.
Related reading: Taxes: How Wealth Is Structured and Preserved · How the Estate Tax Works: Who Actually Pays It, and How Little It Raises · Do You Pay Tax on an Inheritance? · The States With the Most Millionaires — and the Richest States, Measured Properly · How to Set Up a Trust Fund — and What It Really Costs
