If you’ve recently lost a close family member and received an inheritance, you’re likely wondering whether you’ll have to pay an inheritance tax. The short answer to the question is no. Texas does not have an inheritance tax.
Estate Tax and Inheritance Tax are Not the Same Thing
Many people use estate tax and inhertance tax interchangeably, but they’re different. An estate tax is a tax applied to to an estate of a person who dies, if the value of their estate more than the estate tax exclusion. An inheritance tax is paid by the person receiving the inheritance.
Texas doesn’t have a separate estate tax or inheritance tax.
Why Texas No Longer has a Death Tax
Before 1995, Texas collected a separate inheritance tax, called a “pick-up tax.” The tax did not increase the total amount of estate tax paid upon death. Rather, a portion of the federal estate tax, equal to the allowable state death tax credit on the federal estate tax return, was deducted from amount due to the federal government and paid to Texas.
That system ended when federal law phased out the state death tax credit beginning in 2005. In response, some states changed their laws to “decouple” from federal system and imposed their own inheritance taxes to compensate for the decline in revenue. Texas did not.
When Federal Estate Tax Laws Apply
Even though Texas doesn’t have a state inheritance or estate tax, federal law imposes an estate tax on very large estates. In 2026, the federal estate and gift tax exemption is $15 million per person. With proper planning, married couples can pass $30 million to their heirs without any estate tax liability. The estate tax only applies to the amount over the exemption.
Because the federal estate tax exemption is so high, the federal estate tax is not an issue for most Americans.
What if You Inherit fom Someone in Another State?
Texas doesn’t have an inheritance tax, but some other states do. States that currently impose an inheritance tax include Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. If the person who died lived in a state that imposes an inheritance tax, that state’s rules may apply to what you receive.
How much you will owe typically depends on how closely related you were to the person from whom you received the inheritance. For example, a surviving spouse is typically exempt from inheritance tax, while non-relatives pay more.
If you have questions about whether federal estate tax could apply in your situation, or how inherited property should be handled, it’s a good idea to speak to an estate planning attorney.
For official Texas tax information, you can access the Texas Comptroller of Public Accounts website.
Image by Peggy_Marco from Pixabay
