When Is an Estate Subject to State Death Taxes?

In addition to the federal estate tax, many states impose their own taxes at death. Understanding these state-level estate and inheritance taxes, often collectively called “death taxes,” is essential for creating a comprehensive estate plan that protects your legacy and ensures your loved ones receive what you intend.

Federal vs. State Death Taxes

The federal estate tax is calculated based on the total value of a person’s estate at death and is paid from the estate itself. Some states impose a similar estate tax at the state level, while a few states levy an inheritance tax, which is assessed on the person receiving the inheritance rather than the estate. State death taxes can significantly affect the net inheritance, so it’s important to know the rules in the states where you live or own property.

Which States Impose Death Taxes?

As of 2025:

Estate Tax States:
Connecticut, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington

Inheritance Tax States:
Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania

Note: Maryland is unique in imposing both an estate and an inheritance tax.

Laws differ by state, including exemption thresholds, deductions, and tax rates. Generally, a state death tax applies if the deceased lived in the state or owned real estate or tangible personal property there at the time of death.

State Death Tax Examples

1. Deceased Person Lived in New York
If your uncle lived in New York at the time of his death, his estate may owe New York estate tax, in addition to federal estate tax. Whether tax is due depends on the estate’s total value and available exemptions. New York does not impose an inheritance tax, so heirs are not taxed individually.

2. Deceased Person Lived in Florida
If your uncle lived in Florida and owned no property in a state with an estate tax, his estate would owe no state-level estate taxes. Federal estate taxes could still apply. Florida also imposes no inheritance tax, so heirs would not owe state taxes on their inheritance.

3. Heir Lives in a Different State
If your uncle lived in Florida and you live in New York, the estate would still not owe New York estate tax because the deceased was not a resident and owned no property in New York. State inheritance taxes generally follow the decedent’s state, not the heir’s residence.

4. Deceased Person Owned Property in Another State
If a Florida resident owned a vacation home in New York, the estate may owe New York estate tax—but only on the value of the New York property. Other assets located outside New York would not be subject to New York estate tax.

5. Inheritance Tax Example: Kentucky
If your aunt lived in Kentucky (which does not have an estate tax) and you inherit her estate while living in Florida, you may owe Kentucky inheritance tax if the value exceeds the state exemption. This shows that inheritance taxes can apply even when the heir lives in a state without such taxes.

6. Snowbirds and Dual Residency
John spends six months in Connecticut and six months in Florida but is officially a Connecticut resident. For estate tax purposes, Connecticut considers John a resident, so his entire estate (including property in Florida) would be subject to Connecticut estate tax at his death.

Minimize Tax, Maximize Inheritance

State death taxes can apply in unexpected ways. They depend on where the deceased lived, where they owned property, and whether the state imposes an estate or inheritance tax. Even if you live in a state without death taxes, property located in a taxed state may trigger liability.

If you live or own property in a state with an estate or inheritance tax, it is crucial to factor this into your estate plan. Proper planning can minimize taxes and maximize what passes to your loved ones.

Contact us to review your estate plan and ensure you’re prepared for state-level tax considerations.