Sure, unless you’re super wealthy, you’ll probably avoid the $12.92 million threshold for the federal estate tax, regardless of which state you die in. But some states aren’t so generous with estate tax exemptions, and others impose another type of death tax, known as an inheritance tax.
Paying state death taxes can become very expensive for the loved ones you leave behind, but you might save them some money if you live — and have assets in — these states.
What is death tax?
Death taxes are tax liabilities incurred by your heirs when you die. Federal death taxes don't apply unless you leave your heirs a multi-million dollar estate. But in some states, heirs pay death taxes on even small inheritances.
For example, some types of heirs in Nebraska pay a death tax rate of 15% on inheritances over $25,000. The good news is you don't have to worry about state death taxes if you live in a state without estate tax or inheritance tax.
States with no inheritance or estate tax
The states on this list have no death taxes. However, keep in mind that not every state is as tax-friendly when it comes to other taxes and fees or the overall cost of living.
If taxes are a primary consideration for where you live, weigh the pros and cons and consult your financial advisor or a qualified tax professional before making any big moves.
There are no death taxes in Alabama, which will make your heirs happy. And although you’ll pay tax on groceries in this state while you’re still alive, the grocery tax in Alabama was recently reduced. So, going shopping may be a little less expensive than it used to be.
Additionally, if you're an hourly employee, a new overtime law in Alabama might save you even more in taxes.
Alaska residents can transfer assets to heirs tax-free when they die. You might even be able to leave your loved ones more than you had planned if you move to The Last Frontier. That’s because Alaska will pay you to live there.
You could receive a payment through the state every year through the Permanent Fund Dividend.
- The 2023 payment amount is $1,312.
- That means if you received that amount every year, you’d have an extra $32,800 over the course of 25 years, which is sure to make your heirs excited.
What’s not to love about Arizona? There aren’t any death taxes, and you’ll even pay a low income tax rate while you’re living out your days. That’s because the state imposes a flat income tax rate of only 2.5%. That’s especially good news if you’re a high earner.
And if you’re already a resident of the Grand Canyon State, you may be eligible for an Arizona family tax rebate of up to $750. If you are eligible for the rebate, you can expect a payment soon.
Arkansas might not be your first thought for relocation, but there’s a possibility for tax savings if you do choose this state as your new home.
Not only is there no estate or inheritance tax in the Bear State, but a recent Arkansas tax cut bill reduced income tax rates for the second time this year. More tax savings could mean more money for the loved ones you’ll leave behind one day.
You probably haven’t thought about moving to California for tax savings since it’s generally a high-tax state. But your heirs won’t pay any death taxes, and some parts of the state are more affordable than others.
For example, you could save money on property taxes if you choose one of the cheapest places in California to buy a home.
Death taxes are nonexistent in Colorado, and some residents of the Centennial State will benefit from tax savings before they pass away, thanks to a Colorado EV tax credit that’s worth up to $5,000.
- Colorado’s state EV credit is one of the highest available.
- Combined with the Federal EV tax credit, the savings could really add up.
Property taxes in the state are on the low end, too. So, both you and your heir can enjoy the tax breaks the state has to offer.
There are plenty of reasons so many people retire in Florida, and tax savings is a major factor for some. The state has no death taxes or income taxes.
Additionally, a Florida tax relief bill passed earlier this year made several items, including diapers and baby and toddler clothing, exempt from the state’s sales tax.
You don’t have to worry about your heirs paying a big state tax bill if you die in Georgia. There is no estate or inheritance tax in the state.
And although gas prices are up across the country, you could pay a little less at the pump if you’re already a resident, thanks to a Georgia gas tax holiday that’s currently in effect.
Idaho might not be the most popular retirement destination since the state taxes some common types of retirement income, including pension. But your children won’t have to pay the state when claiming their inheritance in the Gem State.
Idaho also moved to a flat income tax rate for 2023, which is good news for higher earners. You’ll pay a 5.8% income tax rate, regardless of how much you make.
Indiana doesn’t have death taxes, and you may be able to pay less taxes while you’re still alive, too, depending which part of the state you live in. That’s because while Indiana has a fairly low flat income tax rate of 3.15%, some counties impose income taxes of their own.
Kansas is another state with no estate or inheritance tax .
However, residents of the Sunflower State could pay some hefty taxes when it comes to everyday purchases since Kansas has one of the highest sales tax rates in the country.
However, some taxes in Louisiana aren’t so appealing, such as the state’s sales tax, which is higher than in most states. So, you’ll want to weigh the pros and cons before moving to Louisiana for tax savings.
If you enjoy the colder weather and don’t want your heirs to pay taxes on their inheritances, you might want to consider a move to Michigan.
There is no estate or inheritance tax, and there is even a Michigan home heating tax credit that might help with those hefty utility bills. There is some bad news, though, since you can’t exceed certain income limits to qualify.
And Mississippi has a flat state income tax rate that is set to reduce even further in the coming years, which is good news for the wealthy and everyone else, too.
Your loved ones won’t pay any state death taxes in Missouri, but if you live in this state, you’ll likely pay more to get from one place to another. That’s because the gas tax in Missouri is quite high, at $0.35 per gallon. However, this rate is still lower than in some states.
Montana doesn’t have death taxes, and recent legislation provides long-term property tax relief to homeowners in the state.
Income tax rates in Montana aren’t as high as in some states, but they aren’t the lowest in the country, either.
- Most residents currently pay a 6.75% income tax rate.
- But the high tax bracket will lower to 6.5% in 2024.
Nevada doesn’t tax your heirs’ inheritance, and it also happens to be one of the states with no income tax. To make Nevada even more appealing, homeowners in the state enjoy fairly low property tax bills compared to other states. So, there is a lot of potential for tax savings if you live in Nevada.
However, New Hampshire does tax some earnings.
- There is no personal income tax in New Hampshire, but there is currently a tax on interest in dividends.
- However, the tax on interest and dividends will be repealed in 2027.
If you’ve had your eye set on the Southwest, New Mexico could be a good contender for relocation. Your heirs won’t pay a dime to the state when you die since there is no estate or inheritance tax.
Additionally, high earners won’t pay more than a 5.9% income tax rate in the Land of Enchantment. That’s much lower than in some states.
There are no death taxes in North Carolina, which should make your heirs happy. And low property taxes in the state might make you happy, too.
Although groceries aren’t taxed by North Carolina, watch out for those pesky local sales taxes when you grocery shop.
Not paying an estate or inheritance tax is just one of the tax benefits of living in North Dakota. For example, the highest income tax you’ll pay is 2.5%, and thanks to recently enacted legislation, many filers are exempt from paying any state income tax at all. Property tax and sales tax rates in North Dakota are reasonable, too.
Your heirs won’t pay anything in Ohio on their newly acquired assets when you die since there are no death taxes in the state. But they might pay some hefty taxes later. That’s because property taxes in Ohio are higher than in most states. So, you might want to keep that in mind when leaving behind real estate.
Oklahoma may be an appealing state to grow your wealth. After all, you can transfer your assets to heirs tax-free after your death. And property tax rates are below average in Oklahoma, too. Income tax rates in the Sooner State could also benefit high earners since income tax rates never reach 5%.
Your loved ones won’t get a tax bill from South Carolina when you’re gone since the state doesn't have any estate or inheritance taxes. There are other things to like about tax in South Carolina, too.
- For one thing, the property tax rate in South Carolina is one of the lowest in the nation.
- And while there are sales taxes in the state, they are reasonable when compared to the rest of the country.
There are no death taxes in South Dakota, and sales taxes are pretty low, too. However, the state does tax some essential items, such as groceries and clothing.
Even so, you’re likely to spend less on state taxes, since South Dakota is a state that won't tax your income. And who doesn’t love making tax-free money (at least at the state level)? The IRS will still take its share, of course
There are a few things to love about living — and dying — in Tennessee. Besides not having an estate or inheritance tax, this state also won’t tax your income. So, it’s a win-win for you and your heirs.
However, Tennessee does still tax groceries, so that’s something to keep in mind before making a decision to relocate.
Not having to pay income tax is one of the reasons some people move to Texas. But sparing heirs from paying death taxes may be another since there aren’t any in the Lonestar State. And thanks to state lawmakers reaching a Texas property tax deal earlier this year, your heirs might save even more on any real estate you leave behind in Texas.
Becoming a resident of Utah could benefit your heirs when you die since there are no death taxes in the state. However, you might find living in the state a little less affordable. For example, Utah is one of only 11 states that still tax Social Security retirement benefits. Paying that extra income tax is definitely a con to living in the Beehive State.
Virginia isn’t known as being a very tax-friendly place to live. Between local sales taxes on groceries and generally high income tax rates, relocating to the commonwealth might not be on your mind. However, there is no estate or inheritance tax in Virginia.
If you’re already a resident of the commonwealth, you might be pleased to know Virginia rebate checks have been confirmed for 2023. However, not everyone qualifies for a payment.
West Virginia may not be the most popular retirement spot, but residents can enjoy many tax benefits in the state. Of course, there are no death taxes in West Virginia since it has made this list. But homeowners in the state also pay generally lower property tax bills than in most other states.
And if you already live in West Virginia, you could pay less income tax this year than you did in 2022, thanks to recently enacted legislation.
In Wisconsin, your loved ones won’t have to pay a state inheritance or estate tax. But you might find living there less appealing, between generally high property taxes and income tax rates that are higher than in most states on this list.
Of course, there are no death taxes in Wyoming, which makes it very tax-friendly for your heirs, regardless of your net worth.
Katelyn has more than 6 years’ experience working in tax and finance. While she specializes in tax content, Katelyn has also written for digital publications on topics including insurance, retirement and financial planning and has had financial advice commissioned by national print publications. She believes that knowledge is the key to success and enjoys helping others reach their goals by providing content that educates and informs.
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