Educational guide — not legal or tax advice. Inheritance and estate tax rules vary substantially by state and change over time. Consult a CPA or estate attorney about your specific situation.
The direct answer
For the vast majority of Americans inheriting a house: no, you don’t pay inheritance tax on it.
There’s no federal inheritance tax at all — that’s a different country’s system. The US has federal estate tax (paid by the estate, not the heir) with the $15,000,000 basic exclusion set by 26 U.S.C. §2010(c)(3)(A) — a $15 million exemption per person in 2026. 26 U.S.C. §6018(a)(1) requires an estate tax return only where the gross estate exceeds the basic exclusion amount in effect under §2010(c) for the calendar year of death, and §6018(a)(3) reduces that filing threshold (but not below zero) by post-1976 adjusted taxable gifts. No sourced figure for the share of US estates that owe the tax is stated here. A small handful of states have their own inheritance taxes, but the rest don’t.
And on top of that, inherited real estate gets a step-up in cost basis under the federal income tax code, which usually eliminates capital gains tax even if you sell the property soon after inheriting.
For most people, an inherited house transfers without any tax bill. The complications below apply only in specific situations.
Two concepts often confused: inheritance tax vs. estate tax
These are different things that get called by the same name in casual conversation:
Estate tax (paid by the estate)
A tax levied on the estate before anything is distributed to heirs. The estate pays the tax; the heirs receive whatever’s left.
- Federal estate tax: Only applies above the basic exclusion — $15,000,000 under 26 U.S.C. §2010(c)(3)(A). §2010(c)(2) and (c)(4) let a surviving spouse add the deceased spousal unused exclusion, so two exclusions can be applied across a couple. The rate schedule is set separately by 26 U.S.C. §2001(c), whose top bracket reads “Over $1,000,000 — $345,800, plus 40 percent of the excess of such amount over $1,000,000”. §2001(b)(1) applies that schedule to a tentative tax on the taxable estate plus post-1976 adjusted taxable gifts, and the §2010(a) unified credit is then applied against it, so the schedule’s own $1,000,000 bracket floor is not the point at which tax becomes payable.
- State estate tax: A dozen states plus DC have their own estate tax with thresholds far below the federal exclusion; the ones read at source are listed under Scenario 2 below.
Inheritance tax (paid by the heir)
A tax levied on the recipient of the inheritance, with the rate often depending on the heir’s relationship to the deceased.
- No federal inheritance tax. The US does not have one.
- Four states impose a state inheritance tax on a death today. Two more did recently and no longer do:
- Pennsylvania — rate schedule not stated here; the statute could not be read from this environment
- New Jersey — rate schedule not stated here; the statute could not be read from this environment
- Kentucky — Class A (including siblings, nieces and nephews, of the whole or half blood) exempt; Class B 4%–16%; Class C 6%–16%, each band set by KRS §140.070(2)–(3) and each exemption by §140.080(1), both as amended by 2026 Ky. Acts ch. 198 effective 27 April 2026
- Iowa — repealed. Iowa Code §450.98: “Effective January 1, 2025, this chapter shall not apply to property of estates of decedents dying on or after January 1, 2025.” §450B.8 repeals the qualified use inheritance tax on the same terms. Both were enacted by 2021 Iowa Acts, ch. 177 (§§12, 15, 16 and §§13, 15, 16 respectively). Iowa has no estate tax either
- Maryland — 10% of clear value (Md. Code, Tax-Gen. §7-204(b)), with exemptions for close relatives; Maryland also has an estate tax
- Nebraska — still imposed, not phased out. §77-2004(1)(b) charges 1% of the clear market value received by each person in excess of $100,000 for decedents dying on or after 1 January 2023, and §77-2005(1) sets a separate rate for uncles, aunts, nieces and nephews (Neb. Rev. Stat. §77-2004, §77-2005)
If you inherit from someone who lived in any state outside that list, there is no state inheritance tax, period.
Specifically: do you pay inheritance tax on a house?
For most situations, no. Here’s the breakdown by scenario.
Scenario 1: Federal level
You inherit a house anywhere in the US. The federal government does not impose an inheritance tax on you. If the total estate (house + everything else) was above the 26 U.S.C. §2010(c)(3)(A) basic exclusion of $15 million per person, the estate itself may owe federal estate tax — but that’s the estate’s problem, not yours as the heir.
Scenario 2: State estate tax states
If the deceased lived in (or owned real estate in) a state with a state estate tax — Massachusetts, New York, Oregon, Washington, Hawaii, Illinois, Maine, Maryland, Minnesota, Rhode Island, Vermont, Connecticut, DC — the estate may owe state estate tax if it exceeds that state’s threshold. Thresholds vary widely:
- Oregon: $1,000,000 — the rate table in ORS 118.010(4) begins there, at 10% of the excess above it
- Massachusetts: $2,000,000 — §2A(g) relieves estates of decedents dying on or after 1 January 2023 from the tax where the value of the federal taxable estate is not more than that figure, and §2A(f) caps the credit at $99,600 (Mass. Gen. Laws ch. 65C, §2A(f), (g))
- Washington: $3,076,000 for deaths on or after 1 January 2026 and before 1 July 2026, then $3,000,000 (RCW 83.100.020(1)(a)(ix)–(x))
- Maryland: $5,000,000 for a decedent dying on or after 1 January 2019, plus any deceased spousal unused exclusion calculated under §7-309(b)(9) (Md. Code, Tax-Gen. §7-309(b)(3)(i)6)
- Minnesota: $3,000,000 for decedents dying in 2020 and thereafter, a flat figure rather than an indexed one (Minn. Stat. §291.016, subd. 3(b)(4))
- Vermont: $5,000,000, with 16% on the excess, a flat figure rather than an indexed one (32 V.S.A. §7442a(b))
New York, Connecticut, Illinois, Hawaii and the District of Columbia also impose an estate tax. Their thresholds are not stated here because their statutes could not be read from this environment.
If the estate (including the house’s value) is above the threshold, the estate pays the tax before distributing assets. You as the heir don’t write a check.
Scenario 3: State inheritance tax states
If you inherit from someone who lived in Pennsylvania, New Jersey, Kentucky, Maryland or Nebraska, you may owe state inheritance tax on what you receive — including real estate. Iowa is not on that list: its inheritance tax does not apply to a death on or after 1 January 2025 (Iowa Code §450.98).
The rate depends on your relationship to the deceased:
Kentucky, read at KRS §140.060, §140.070 and §140.080. Both rate and exemption sections were amended by 2026 Ky. Acts ch. 198 — §40 amending §140.070 and §41 amending §140.080, each effective 27 April 2026 — and §68 of that Act provides that the §140.080 amendments apply to the estates of decedents who died on or after 1 January 2026 (Legislative Research Commission Note, 4/27/2026):
| Relationship | Class | Rate |
|---|---|---|
| Surviving spouse, parent, child by blood, stepchild, child adopted during infancy, child adopted during adulthood who was reared by the decedent during infancy, a grandchild who is the issue of any of those children, nephew, niece, nephew or niece of the half blood, brother, sister, brother or sister of the half blood | A | Exempt on the total inheritable interest (§140.080(1)(b)); the surviving spouse is separately exempt on the total inheritable interest under §140.080(1)(a) |
| Daughter-in-law, son-in-law, aunt, uncle, and a great-grandchild who is the grandchild of a child by blood, of a stepchild or of a child adopted during infancy | B | 4% to 16% by band, after a $1,000 exemption (§140.070(2); §140.080(1)(c)) |
| Any educational, religious or other institution, society or association, and any city, town or public institution, not exempted by §140.060; and any person not in Class A or Class B | C | 6% to 16% by band, after a $500 exemption (§140.070(3); §140.080(1)(d)) |
The bands themselves, as §140.070(2) and (3) state them:
| Value of the inheritable interest | Class B rate (§140.070(2)) | Class C rate (§140.070(3)) |
|---|---|---|
| Not exceeding $10,000 | 4% | 6% |
| Over $10,000, not over $20,000 | 5% | 8% |
| Over $20,000, not over $30,000 | 6% | 10% |
| Over $30,000, not over $45,000 | 8% | 12% |
| Over $45,000, not over $60,000 | 10% | 14% |
| Over $60,000, not over $100,000 | 12% | 16% (the Class C schedule’s top band begins at $60,000) |
| Over $100,000, not over $200,000 | 14% | 16% |
| Over $200,000 | 16% | 16% |
Two mechanisms sit on top of those figures. §140.080(1) provides that the exemptions are “chargeable against the lowest bracket or brackets” of the inheritable interest, so a Class B heir’s $1,000 comes off the 4% band rather than the top one. And §140.080(2) provides that where the decedent was not a resident of Kentucky, the exemption is the same proportion of the resident exemption that the Kentucky-taxable property bears to the whole property transferred.
On the class definitions: §140.070(1) places a sibling, niece or nephew — including of the half blood — in Kentucky’s Class A, and §140.080(1)(b) exempts Class A on the total inheritable interest. §140.070(1) itself sets no rate for Class A; it provides that the tax “shall be subject to the provisions of KRS 140.080”. A great-grandchild is Class B under §140.070(2), not Class A.
Maryland charges 10% of the clear value of property that passes (Md. Code, Tax-Gen. §7-204(b)), with exemptions for close relatives elsewhere in that subtitle.
Nebraska charges 1% of the clear market value received by each person in excess of $100,000 for decedents dying on or after 1 January 2023 — the figure was $40,000 for deaths before that date (§77-2004(1)(a)). §77-2004(2) sets the class that rate applies to: father, mother, grandfather, grandmother, brother, sister, son, daughter, a legally adopted child, any lineal descendant, any legally adopted lineal descendant, any person to whom the deceased stood in the acknowledged relation of a parent for at least ten years before death, that person’s lineal descendants, and the spouse or surviving spouse of anyone in the class. §77-2004(3) exempts the homestead allowance, exempt property and family maintenance allowance (Neb. Rev. Stat. §77-2004).
Pennsylvania’s and New Jersey’s rate schedules are not stated here. Neither state’s statute could be read from this environment, so no rate and no worked example is given for either.
This is the practical concern most people have when they ask about inheritance tax on a house. It only applies in those specific states. For everyone else, there’s no state inheritance tax.
Scenario 4: The house is in a different state than where the deceased lived
This is where it gets specific. If the deceased lived in Florida (no inheritance tax) but owned a vacation house in Pennsylvania (inheritance tax state), Pennsylvania may impose its inheritance tax on the value of the PA property regardless of where the deceased lived. State inheritance taxes generally apply to property located in the state.
Capital gains tax: the stepped-up basis
Even when there’s no inheritance tax, people sometimes worry about capital gains tax when they sell an inherited house. There’s good news here: inherited property gets a step-up in cost basis under IRC §1014.
What that means:
- Under 26 U.S.C. §1014(a)(1) the basis of property acquired from a decedent is its fair market value at the date of the decedent’s death; §1014(a)(2) substitutes the alternate valuation date where the executor elects it under §2032, which §2032(a)(2) sets at 6 months after death for property not distributed, sold, exchanged or otherwise disposed of within those 6 months, and §2032(a)(1) at the date of disposition for property that was. §2032(c) permits the election only where it decreases both the value of the gross estate and the sum of the chapter 11 and chapter 13 tax, and §2032(d)(1) makes the election irrevocable once made on the return.
- If you sell the property soon after inheriting it, your capital gain is calculated against that stepped-up basis — typically close to zero gain.
- Decades of appreciation on the deceased’s watch are effectively erased for tax purposes.
A worked example, applying 26 U.S.C. §1014(a)(1) to invented numbers. Your parent bought a house in 1985 for $80,000. They die in 2026 when the house is worth $500,000. You inherit it.
- Without the §1014(a)(1) step-up: if you sold for $500,000, the gain would be measured from the $80,000 they paid — $420,000.
- With it: §1014(a)(1) makes the basis $500,000, the date-of-death value. Sell for $510,000 a year later and the gain is $10,000.
This is one of the most generous tax provisions in the US code. It eliminates most capital gains tax on inherited real estate.
A few details that matter:
- Each spouse’s death triggers a step-up on their share. In community property states (CA, TX, etc.), the entire jointly-held property usually gets a stepped-up basis when the first spouse dies.
- Step-up applies to inheritances, not gifts. A house given to you during the giver’s lifetime keeps the giver’s original cost basis.
- The Tax Cuts and Jobs Act (TCJA) preserved the step-up at death; it’s been on the chopping block in several political cycles but is still in effect as of 2026.
Property tax: a different question
People sometimes conflate inheritance tax, estate tax, and property tax — they’re three different things.
- Property tax is an ongoing tax based on the property’s value, paid annually by whoever owns the property. Inheriting a house means you’re now responsible for property tax going forward.
- Some states (notably California with Proposition 19) have rules that reassess property values when ownership changes, potentially raising the property tax bill substantially. Children inheriting a parent’s primary residence in California get limited protection from this, but the rules narrowed significantly in 2021.
Property tax considerations are real but separate from inheritance/estate tax.
What about the mortgage?
If the inherited house has an outstanding mortgage, the mortgage doesn’t disappear — it remains attached to the property. Options:
- Assume the mortgage if the lender allows and you can qualify.
- Refinance the mortgage into your name.
- Pay it off from estate assets or your own funds.
- Sell the house and pay off the mortgage from sale proceeds.
The Garn-St. Germain Act (federal law) protects close relatives — particularly surviving spouses — from being forced to immediately pay off (“accelerate”) a mortgage when they inherit. The lender can’t force a due-on-sale call if the heir is a close relative.
For a non-relative inheriting a property with a mortgage, the lender may technically have the right to accelerate, but in practice most lenders allow assumption or refinancing.
What if the house is in a trust?
If the deceased held the house in a revocable living trust, the house passes to the named beneficiaries without going through probate, but tax treatment is largely the same:
- No federal inheritance tax (because there isn’t one).
- State inheritance tax may still apply if the deceased lived in PA, NJ, KY, IA, or MD.
- State estate tax may still apply if the estate exceeds the threshold.
- Step-up in basis still applies.
The trust avoids probate but doesn’t change the tax treatment.
The thresholds that determine whether tax applies
The questions each threshold asks, in the order they apply:
- Is the total estate above the basic exclusion — $15,000,000 under 26 U.S.C. §2010(c)(3)(A)? If no, no federal estate tax.
- Did the deceased live in a state with state estate tax (MA, NY, OR, WA, etc.)? If yes, check the state threshold; the estate pays state estate tax before distribution.
- Did the deceased live in PA, NJ, KY, IA, or MD? If yes, you may owe state inheritance tax based on your relationship to the deceased.
- Where none of the three applies, no federal estate tax, state estate tax or state inheritance tax is imposed on the house.
- Basis. Under 26 U.S.C. §1014(a)(1) property acquired from a decedent takes a basis equal to its fair market value at the date of death, so gain on a later sale is measured from that value rather than from the decedent’s cost.
When to talk to a CPA
Situations in which the filing requirements are more involved:
- The estate is large enough that state or federal estate tax may apply.
- The deceased lived in one of the inheritance tax states.
- You’re inheriting from a non-spouse, non-lineal-descendant family member in PA, NJ, KY, or MD.
- The house was held in a complex ownership structure (trust, partnership, LLC).
- You plan to sell soon and want to confirm the stepped-up basis calculation.
- The estate has cross-border (international or multi-state) elements.
For straightforward inheritances of a primary residence by a spouse or child, the tax picture is usually simple and a CPA call is optional.
Related reading
- Estate Tax vs. Inheritance Tax — the full distinction explained
- What Is Estate Planning? The Documents and What Each Does
- What Is Probate and How Does It Work?
- Will vs. Trust: How They Differ
- Is Life Insurance Taxable to the Beneficiary?
- What to Do When Someone Dies: A Step-by-Step Checklist
Educational information only — not legal, tax, or financial advice. Federal and state tax rules change. Consult a CPA or tax attorney about your specific situation. Sources, each read at the section cited beside the figure it supports: 26 U.S.C. §§2001(a)–(c), 2010(c), 1014(a), 2032(a), (c), (d), 6018(a); ORS 118.010; Mass. Gen. Laws ch. 65C §2A; RCW 83.100.020; Md. Code, Tax-Gen. §§7-204, 7-309; Minn. Stat. §291.016; 32 V.S.A. §7442a; KRS §§140.060, 140.070, 140.080 (read at apps.legislature.ky.gov, which serves each section as a one-section PDF, 27 September 2026); Neb. Rev. Stat. §77-2004; Iowa Code §§450.98, 450B.8. Pennsylvania, New Jersey, New York, Connecticut, Illinois, Hawaii and the District of Columbia are not stated on this page because their statutes could not be read at source.