How Much Can You Inherit Without Paying Taxes in 2023?

Understanding Inheritance Taxes

Inheritance tax is a levy imposed on assets inherited from a deceased person. Unlike estate tax, which is paid by the estate before distribution, inheritance tax is paid by the recipient of the inheritance.

Federal Inheritance Tax

There is no federal inheritance tax in the United States. However, the federal government does impose an estate tax on estates valued over $12.92 million in 2023. This exemption amount is adjusted annually for inflation.

State Inheritance Taxes

Only six states in the U.S. have an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. The taxation depends on the state in which the deceased lived or owned property, the value of the inheritance, and the beneficiary’s relationship to the decedent.

Inheritance Tax Thresholds

In most states with inheritance tax, a certain amount of inheritance is exempt from taxation. The exemption amounts vary by state and relationship to the deceased.

Estate Tax vs. Inheritance Tax

Estate tax is levied on the value of the decedent’s estate before distribution, while inheritance tax is levied on the value of the inheritance received by the beneficiary. The distinction becomes important when an estate is subject to both estate and inheritance taxes.

Avoiding Inheritance Tax

There are strategies to minimize inheritance tax liability, such as:

  • Life insurance: Death benefits from life insurance policies are generally not subject to inheritance tax.
  • Trusts: Assets placed in an irrevocable trust are removed from the estate and may avoid inheritance tax.

How Much Can You Inherit Tax-Free in 2023?

The federal estate tax exemption for 2023 is $12.92 million. This means that estates valued below this amount are not subject to federal estate tax.

The inheritance tax exemptions and rates vary by state. In general, spouses and immediate family members are exempt from inheritance tax, while more distant relatives and unrelated heirs may be subject to tax.

Inheritance tax is a complex topic with varying rules and exemptions depending on the state and the relationship between the deceased and the beneficiary. Understanding the basics of inheritance tax can help you plan your estate and minimize tax liability.

How Do I Leave An Inheritance That Won’t Be Taxed?


What is the most you can inherit without paying taxes?

In 2024, the first $13,610,000 of an estate is exempt from taxes, up from $12,920,000 in 2023. Estate taxes are based on the size of the estate. It’s a progressive tax, just like our federal income tax. That means that the larger the estate, the higher the tax rate it is subject to.

Do you have to report inheritance money to IRS?

In general, any inheritance you receive does not need to be reported to the IRS. You typically don’t need to report inheritance money to the IRS because inheritances aren’t considered taxable income by the federal government. That said, earnings made off of the inheritance may need to be reported.

Does inheritance count as income?

Inheritances are not considered income for federal tax purposes, whether the individual inherits cash, investments or property.

How much can you inherit before taxes kick in?

Another key difference: While there is no federal inheritance tax, but there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024, and the estate tax rate ranges from 18% to 40%.

Do you have to pay inheritance tax 2022?

Although chances are slim you’ll need to pay it – the maximum value threshold is high and only six states levy that tax as of 2022 – it’s better to know how the inheritance tax works and whether you can avoid it. Important information: Tax return season 2023: What to know before filing your taxes Is Social Security taxable?

Do you have to pay inheritance tax in 2023?

Inheritance tax is calculated based on the value of an inherited gift. Spouses, children, and other close relatives are often exempt from paying the tax. Only six states impose an inheritance tax for 2023, and one is phasing it out. Sign up to get the inside scoop on today’s biggest stories in markets, tech, and business — delivered daily.

How much inheritance tax do you have to pay?

Each individual must pay that tax amount and report the information on an inheritance tax form to the state. There’s usually an exemption amount for inheritance taxes that’s normally set very high, of at least $1 million, and only the amount exceeding that threshold is taxed.

Can you get an inheritance without paying taxes?

If you have substantial wealth to pass on, having your heir move to a state without an inheritance tax might be worth consideration. The tax is based on where the recipient lives. Additionally, leaving assets to spouses and children generally avoids the inheritance tax. How much inheritance can you get without paying taxes?

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