What Is Inheritance Tax?

Inheritance tax is a state-level tax paid by the person who receives an inheritance — not by the estate. Only six states currently have an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Spouses are typically exempt, and children may be exempt or taxed at lower rates. The federal government does not have an inheritance tax (it has an estate tax, which is different). If you live in or inherit from someone in one of these states, check the rules carefully.