The federal estate tax exemption is $15,000,000 per person in 2026 (about $30,000,000 for a married couple with portability), and the One Big Beautiful Bill Act made that higher level permanent. Most Americans will never owe the IRS a dime at death. But a dozen states plus the District of Columbia impose their own estate tax with exemptions far below the federal line, and five states levy a separate inheritance tax on heirs. An estate can owe six figures to a state while owing nothing to the IRS.
The 12 estate-tax states and their 2026 exemptions
| State | 2026 exemption | Top rate | Notable rule |
|---|---|---|---|
| Connecticut | $15,000,000 | 12% | Matches the federal exemption; only state with its own gift tax |
| Hawaii | $5,490,000 | 20% | Among the steepest top rates |
| Illinois | $4,000,000 | 16% | No portability between spouses |
| Maine | $7,160,000 | 12% | Indexed for inflation |
| Maryland | $5,000,000 | 16% | Also has an inheritance tax (only state with both) |
| Massachusetts | $2,000,000 | 16% | Taxes the entire estate from dollar one once exceeded |
| Minnesota | $3,000,000 | 16% | Up to $2M extra deduction for qualifying small business or farm |
| New York | $7,350,000 | 16% | "Cliff": estates over 105% of the exemption lose it entirely |
| Oregon | $1,000,000 | 16% | Lowest exemption in the country |
| Rhode Island | $1,838,056 | 16% | Indexed annually |
| Vermont | $5,000,000 | 16% | |
| Washington | $3,076,000 | 20% (35% above $9M) | Highest top rate in the nation |
| District of Columbia | $4,988,400 | 16% | Indexed annually |
The federal-vs-state gap that catches families
Because every state above sets its threshold well below $15 million, the gap is where surprises happen. A single person who dies in 2026 with a $4,000,000 estate owes zero federal estate tax but could owe:
- Massachusetts: the whole $4M is taxable at 16% (the exemption is only $2M and MA taxes from dollar one) — roughly $640,000.
- Oregon: ($4M - $1M) taxed on a progressive scale up to 16% — roughly $430,000.
- Minnesota: ($4M - $3M) at 16% — about $160,000.
None of those families owed the IRS a cent. State estate taxes affect far more households than the federal tax does.
The five inheritance-tax states
An inheritance tax is different: it is paid by the heir on what they receive, not by the estate. Rates usually rise with how distantly related the heir is, and spouses are exempt everywhere.
| State | Spouse | Children / lineal descendants | Top rate |
|---|---|---|---|
| Kentucky | Exempt | Often exempt | 16% |
| Maryland | Exempt | Exempt | 10% |
| Nebraska | Exempt | 1% over $100K | 18% (county-administered) |
| New Jersey | Exempt | Exempt | 16% |
| Pennsylvania | Exempt | 4.5% | 15% |
Iowa fully repealed its inheritance tax on January 1, 2025, so estates of people who die in 2025 or later owe nothing there. Maryland is the only state that layers an inheritance tax on top of an estate tax.
Two fine-print traps
New York's cliff. If a NY taxable estate exceeds 105% of the exemption (about $7.72M in 2026), the entire exemption is lost and the tax applies to the whole estate. A small miscalculation can cost hundreds of thousands.
Massachusetts from-dollar-one. Once an estate exceeds the $2M exemption, MA taxes the entire value at 16%, not just the amount over $2M. A $2.1M estate owes $336,000, not $16,000.
Planning hooks (not advice)
Common ways families reduce state estate-tax exposure: change domicile to a no-estate-tax state before death and document it (voter registration, license, bank address); move assets into an irrevocable trust; and use the 2026 annual gift exclusion of $19,000 per recipient ($38,000 per couple) to shrink the taxable estate over time. Each has legal and gift-tax consequences, so coordinate with an estate-planning attorney and CPA before acting.
Disclaimer: This article is general educational information, not tax, legal, or investment advice. Dollar amounts come from the 2026 sources listed at the end of this article and may change. Before you act, talk to a licensed CPA, EA, or tax attorney about your own situation.