Death isn’t a pleasant thought, but the reality is that everyone dies, and death taxes can be challenging for family and friends. After saving and planning so you can leave your loved ones with something when you go, the last thing you want is for them to have to hand money over to the government. Which state you die in (and who you leave behind) can make all the difference when it comes to your loved ones’ financial burdens.
What are Death Taxes?
Death taxes are the tax liability incurred by your loved ones after you die. Estate and inheritance taxes can result in big bills for your heirs. But unless you are worth millions of dollars, you might avoid death taxes if you don't have assets in certain states.
With that in mind, the following states are the most expensive states to kick the bucket in when you aren’t a millionaire.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Pennsylvania
Pennsylvania Inheritance tax: 4.5% to 15%
Pennsylvania Estate tax: None
From a death tax perspective, Pennsylvania is an ugly place to die. It is a state with no estate tax, but its costly inheritance tax makes up for it.
Unlike some states with an inheritance tax, if you die in Pennsylvania, your children could wind up with a tax bill. That’s because inheritances are only exempt when your child heir is 21 or younger (or when your heir is a spouse). Surviving children over the age of 21 pay a 4.5% tax rate. And siblings pay even more, with an inheritance tax rate of 12%. Things go from bad to worse when non-relatives inherit assets.
- The inheritance tax in Pennsylvania jumps to 15% for non-relatives.
- If the tax is paid within three months, the state allows a 5% discount, but that means some loved ones still pay 10%.
Maryland
Maryland Inheritance tax: 10% of “clear value” (fair market value minus qualified expenses)
Maryland Estate tax: 16% on the amount that exceeds $5 million
The state has an inheritance tax in addition to an estate tax. While only estates worth $5 million or more need to worry about estate tax in Maryland, some heirs need to pay tax when they inherit as little as $1,001. Domestic partners must pay the inheritance tax unless they inherit the primary residence and they are a joint owner.
So, you might want to think about tying the knot if you live in Maryland. Thankfully, not everyone in Maryland needs to pay the inheritance tax. If you want to save your loved ones the tax bill, consider leaving your assets to exempt heirs.
- Spouses are exempt.
- Children and stepchildren (or the surviving spouses of children) are exempt.
- Parents and grandparents are exempt.
- Siblings are exempt.
New Jersey
New Jersey Inheritance tax: Between 11% and 16%
New Jersey Estate tax: None for deaths after January 1, 2018
New Jersey no longer has an estate tax, but that doesn’t matter for most people. The inheritance tax lives on, and many surviving relatives still have to pay it. Thankfully, New Jersey is a little more lenient when it comes to children and some other relatives.
- Spouses, children, grandchildren, great-grandchildren, parents, grandparents, and civil union partners do not need to pay the inheritance tax in New Jersey.
- Siblings are taxed between 11% and 16% (depending on the amount they inherit).
Nebraska
Nebraska Inheritance tax: Between 1% and 18%
Nebraska Estate tax: None
If you die (or have assets) in Nebraska, your heirs could face a tax bill. Spouses are favored yet again in this state, with no inheritance tax liability. Surviving children get a break but still have to pay some tax. While children only pay 1%, higher values can result in big tax bills. Of course, children aren’t the only ones who need to pay this tax in Nebraska.
- 1% inheritance tax is due on amounts over $40,000 for children, parents, siblings, and grandparents.
- 13% inheritance tax is charged on amounts over $15,000 to aunts, uncles, nieces, and nephews.
- Everyone else (except spouses of those listed above) pays an 18% inheritance tax on all values over $10,000.
Kentucky
Kentucky Inheritance tax: Between 4% and 16%
Kentucky Estate tax: None
Kentucky is a little more tax-friendly (if certain people inherit your assets). Most relatives can avoid any tax liability when they inherit your assets. Children, stepchildren, grandchildren and siblings are all exempt from paying the inheritance tax in Kentucky. Other relatives aren’t so lucky.
- Nieces, nephews, great-grandchildren, aunts, uncles, and children-in-law are charged between 4% and 16% inheritance tax. However, they do get a small exemption of $1,000.
- Everyone else’s tax rate is 6% to 16%, and they get an even smaller exemption of $500.
Honorable Mention: Iowa
While not a significantly expensive state for the dead (anymore), the Hawkeye state still deserves an honorable mention.
Iowa: While there is currently an inheritance tax in Iowa, you can avoid leaving heirs with the tax burden if you can stay alive until 2025 when the tax is eliminated. In 2021, the state decided to eliminate the tax. They’ve already begun phasing it out.
As a result, if you die in 2023, loved ones will pay 60% less than the original “death tax.” Staying alive until 2024 will save them 80%. When assets are valued at $25,000 or less, heirs won’t pay a thing regardless of when you die.
-
-
California Weighs Airbnb, Vrbo Tax for Affordable Housing
California is considering a tax on short-term rentals like those from Airbnb and Vrbo to combat the affordable housing crisis in the state.
-
Is Travel Finally Back? Global Tourists Opened Their Wallets and Set Records In April
See how travel is making a comeback since taking a dip during the pandemic. Skift's monthly Travel Health Index reveals promising tourism metrics that match pre-pandemic numbers.
-
States With Low and No Capital Gains Tax
Capital Gains Tax Low-tax states, including states with no capital gains tax, are selling points for many people lately.
-
94-Year-Old Prevails in Home Equity Supreme Court Case
The U.S. Supreme Court ruled that "home equity theft" violates the Constitution.
-
Texas Imposes New Tax on Electric Vehicles
Texans who own or buy electric vehicles will soon see their registration costs jump nearly 800%.
-
Half of Mothers Have Little or No Retirement Savings
Mother’s Day comes and goes, but many moms face future financial insecurity because they have little or no retirement savings.
-
Having a Baby Could Soon Cost Less in These States
Having a baby is expensive, but these states are trying to make it less costly by eliminating the tax on diapers.
-
Is High-Yield Savings Account Interest Taxable?
Think a high-yield savings account is a good idea? Don’t forget that savings account interest is taxable.
-
2023 Georgia Tax Rebates Up to $500 Are Now Being Sent
Georgia has started sending special 2023 surplus tax refunds to eligible residents.
-
Is Your Scholarship Tax-Free or Taxable?
Scholarships are generally tax-free if certain IRS and other requirements are met.
