Estate Tax vs Inheritance Tax: What’s the Difference?
People use “estate tax” and “inheritance tax” interchangeably, but they are two different taxes. The estate tax is charged to the deceased’s estate before assets are distributed. The inheritance tax is charged to each beneficiary on what they receive, after distribution. Only the federal government and some states tax estates; only five states tax inheritances — and there is no federal inheritance tax.
Who actually pays
The estate tax is paid by the estate, reducing what heirs receive before distribution. The inheritance tax is paid by each individual heir, based on the amount they inherit and their relationship to the deceased. Same family, same assets — but the bill lands on a different taxpayer.
At the federal level
The federal government imposes an estate tax (and a gift tax) above the 2026 exemption of $15 million per person. It does not impose an inheritance tax. So a beneficiary who inherits from a large estate does not pay a separate federal “inheritance” tax — the estate pays first, if it owes anything.
State estate taxes
Thirteen states plus the District of Columbia levy an estate tax: Connecticut, D.C., Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington. Exemptions range from $1 million (Oregon) to $13.61 million (Connecticut), with top rates of 12% to 20%.
State inheritance taxes
Five states levy an inheritance tax — Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Rates are set by the heir’s relationship: surviving spouses are exempt everywhere; children and lineal heirs are exempt or low-rate in most; distant relatives and non-relatives pay the most. Pennsylvania and New Jersey can tax some classes from the first dollar.
Get per-heir figures from our Inheritance Tax Calculator.
How they stack (and with the federal tax)
An estate can owe federal estate tax and state estate tax, and heirs can owe state inheritance tax — in Maryland, both state taxes apply to the same estate. The decedent’s state of residence (or where real property is located) generally governs, not where the heir lives. Compare every jurisdiction in our Compare by State tool.