US Inheritance Tax 12-26-25

For 2025, the U.S. federal estate tax exemption is $13.99 million per individual. For married couples, this amount is portable, effectively allowing a combined exemption of $27.98 million. 

This exemption is for the federal estate tax, which is different from an inheritance tax.  

Federal Estate Tax vs. Inheritance Tax

Estate Tax: This is a tax on the right to transfer property at death. The deceased person's estate is responsible for paying it, and only on the value that exceeds the federal exemption amount. The top federal rate is 40%.

Inheritance Tax: This is a tax on the right of a beneficiary to receive property from a deceased person's estate. The beneficiary is responsible for paying this tax, not the estate. 

The U.S. federal government does not impose an inheritance tax. However, some states do. 

State-Level Taxes

Some states may have their own separate estate or inheritance taxes, often with much lower exemption thresholds than the federal one. These state-level taxes apply based on where the decedent resided or where their property is located. 

States with an inheritance tax include Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Maryland is the only state that has both an estate and an inheritance tax. 

Key 2025 Exemption Amounts

Federal Estate Tax   $13.99 M/ person  $27.98 M /married couple

Annual Gift Tax Exclusion $19,000/ recipient $38,000/ married couple

Note: The estate and gift tax exemptions are unified, meaning any amount of the lifetime exemption used for large gifts during one's life reduces the amount available for the estate tax at death. 

Looking Ahead to 2026

Recent legislation (the "One Big Beautiful Bill Act") has made the increased exemption amounts permanent, so they will not revert to pre-2018 levels as previously scheduled. 

Effective January 1, 2026, the federal exemption will increase to $15 million per individual ($30 million for a married couple), with future annual adjustments for inflation. 

For complex situations involving large estates, it is recommended to consult with a financial advisor or estate planning attorney. You can also find more information on the IRS website or from the Tax Foundation. 

For 2025, the federal estate and gift tax exemption is $13.99 million per individual or $27.98 million per married couple. This is a unified lifetime exemption, meaning it applies to both gifts made during your lifetime and assets transferred at death. 

Federal Exemption Details

Annual Gift Tax Exclusion: In 2025, you can gift up to $19,000 per recipient per year without any gift tax reporting requirements or reducing your lifetime exemption. Married couples can combine their exclusions to gift $38,000 per recipient.

Estate Tax Rate: Estates that exceed the lifetime exemption are subject to a top federal estate tax rate of 40% on the excess amount.

Upcoming Change: The federal exemption is set to increase to $15 million per individual (or $30 million for married couples) in 2026 under the new One Big Beautiful Bill Act, and this increased amount is permanent and will be adjusted for inflation annually starting in 2027. 

State-Level Inheritance and Estate Taxes

In addition to federal rules, several states impose their own estate and/or inheritance taxes. 

Estate Tax: The tax is imposed on the decedent's estate before distribution to heirs. As of December 2025, 12 states and the District of Columbia have a state-level estate tax with varying exemption thresholds.

Inheritance Tax: This tax is paid by the heir who receives the property, not the estate. Only five states impose an inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Spouses are typically exempt from paying this tax in all these states. 

Georgia, where you are located, does not have a state-level estate or inheritance tax. 

For detailed information on filing requirements and forms, visit the IRS website on gift and estate taxes. Consulting a tax professional is recommended for complex situations. 

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Norb Leahy, Dunwoody GA Tea Party Leader