2026 State Estate Tax Exemptions: Thresholds by State
The federal estate tax exemption rose to $15 million per person in 2026 and was made permanent by the One Big Beautiful Bill Act. Most American estates will never owe the IRS a dime. But a dozen states and the District of Columbia run their own estate taxes with exemptions far below the federal line — and five more tax heirs directly through inheritance taxes. For families with a paid-off home in the wrong state, the state bill can be six figures even when the federal tax is zero.
The federal exemption is $15 million in 2026 — states start at $1 million
For 2026 the basic federal exclusion amount is $15,000,000 per individual ($30,000,000 for a married couple using portability), and the OBBBA made that higher, inflation-indexed figure permanent rather than letting it revert to roughly $7 million. The top federal rate stays 40% on the value above the exemption. The IRS publishes the exact indexed figure each year (see the IRS estate tax page).
The planning problem is the gap. A $5 million estate owes nothing to the IRS but can owe a large state tax in Oregon, Massachusetts, or Minnesota. State estate tax is independent of the federal tax: it is triggered by the state where the decedent was domiciled and, for real estate, by the state where the property sits.
The 12 states and DC that tax estates in 2026
| State | 2026 estate tax exemption | Top rate | What to watch |
|---|---|---|---|
| Oregon | $1,000,000 | 16% | Lowest in the nation; not indexed. A 2025 law (SB 1511) raises it to $2.5M but only for deaths on or after Jan 1, 2027. |
| Massachusetts | $2,000,000 | 16% | Not indexed for inflation. |
| Rhode Island | $1,838,056 | 16% | Indexed annually. |
| Minnesota | $3,000,000 | 16% | Held flat for years; not indexed. |
| Washington | $3,076,000 (deaths 1/1–6/30/26); $3,000,000 (from 7/1/26) | 20% | SB 5813 raised the exclusion mid-2026; top rate 20%. |
| Illinois | $4,000,000 | ~16% | No portability between spouses; not indexed. |
| District of Columbia | ~$4,700,000 | 16% | Indexed annually. |
| Maryland | $5,000,000 | 16% | Also levies a separate inheritance tax — the only state with both. |
| Vermont | $5,000,000 | 16% | Flat 16% above the exemption. |
| Hawaii | ~$5,490,000 | 20% | Highest top rate alongside Washington. |
| Maine | $7,160,000 | 12% | Indexed; rose from $6.41M in 2023. |
| New York | $7,350,000 | 16% | "Cliff": exceed 105% and the whole exemption vanishes. |
| Connecticut | ~$15,000,000 | 12% | Tied to the federal exclusion amount. |
Figures reflect each jurisdiction’s published 2026 thresholds; several adjust annually for inflation, so confirm the current number with the relevant Department of Revenue before relying on it. A roundup of source-by-source thresholds is maintained at LegalClarity.
Oregon and Massachusetts: the $1 million trap
Oregon’s $1 million exemption is the lowest in the country and is not inflation-indexed, so a Portland homeowner with a paid-off house, a retirement account, and a life-insurance policy can clear the line without feeling wealthy. Oregon passed SB 1511 to raise the exemption to $2.5 million, but that change applies only to deaths on or after January 1, 2027 — for 2026 the $1 million threshold remains in force (Oregon Department of Revenue).
Massachusetts sets its exemption at $2 million. Unlike the old pre-2023 regime, the tax now applies to the value above the exemption rather than the entire estate, but the threshold is still far below what a modest home plus retirement savings can reach, and it is not indexed.
New York’s cliff: exceed 105% and the exemption vanishes
New York’s $7,350,000 exemption carries an unusual cliff. If the taxable estate exceeds 105% of the exemption — about $7,717,500 — the exemption drops to zero and the tax applies to the first dollar, not just the excess. An estate of $7.3 million owes nothing; an estate of $7.8 million can owe roughly $600,000. That $500,000 difference in value creates a six-figure liability, which is why New Yorkers in the $6–8 million range need precise planning (New York State Department of Taxation and Finance).
Washington changed the rules mid-year in 2026
Washington’s estate tax is the most volatile in 2026. SB 5813 lifted the exclusion from $2,193,000 — frozen since 2018 — to $3,076,000 for deaths between January 1 and June 30, 2026, with an inflation adjustment, then resets the exclusion to $3,000,000 and returns the top rate to 20% for deaths on or after July 1, 2026 (Washington Department of Revenue). The top rate of 20% is tied with Hawaii for the highest in the nation.
Five states tax heirs instead: the inheritance-tax map
An inheritance tax is different from an estate tax: it is paid by the people who receive assets, usually at rates that depend on their relationship to the deceased. Spouses and (in most states) children are exempt or lightly taxed; distant relatives and unrelated heirs pay the most. Five states levy a standalone inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa phased its inheritance tax out completely as of January 1, 2025. Maryland is the only state that imposes both an estate tax and an inheritance tax.
How to tell if your estate owes a state tax
Two facts drive the answer: where the decedent was domiciled, and every state where they owned real estate. Personal property and investments are generally taxed by the domicile state; out-of-state real estate can pull a second state into the picture. The threshold is crossed by fair-market value at date of death, which includes the home, brokerage and retirement accounts, business interests, and the death benefit of life insurance owned by the decedent. Because several states index their exemptions, the line moves a little each year.
Moves that actually reduce state exposure
For estates that brush a state threshold, the levers are concrete. Changing domicile to a no-estate-tax state (Florida, Texas, Nevada, and others) before death is the most powerful, but requires genuine residency — voter registration, driver’s license, and a documented break from the old state. Annual gifting under the $19,000 (2026) per-recipient exclusion removes appreciating assets over time. An irrevocable life insurance trust keeps a death benefit out of the taxable estate and can fund the tax bill. In Illinois and New York, trust structuring at the first spouse’s death is often the fix because those states lack portability. Anyone near a threshold should review the plan with a licensed estate attorney in the relevant state.