Which states have an inheritance tax in 2026?

The current list is Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa repealed its inheritance tax for deaths occurring on or after January 1, 2025, so Iowa remains relevant only to earlier deaths and related filings. Always verify the decedent’s date of death because repeal and phaseout rules can leave older estates under prior law.

Is inheritance tax charged when I withdraw from the IRA?

Not necessarily. Inheritance tax generally arises because the asset passes at death, while income tax generally arises when taxable traditional IRA money is distributed. The state may value the retirement interest for inheritance-tax purposes before you take cash out. A later distribution can then have a separate federal and state income-tax analysis.

Are children always exempt from state inheritance tax?

No. Relationship rules differ by state. Some states exempt close family classes broadly; others tax lineal heirs at a lower rate rather than exempting them entirely. An adult child, sibling, domestic partner, niece, or unrelated friend can fall into different categories. Read the current official instructions for the decedent’s state rather than generalizing from another jurisdiction.

Can an IRA avoid inheritance tax because it bypasses probate?

No blanket rule says that. Beneficiary-designated assets can avoid probate administration yet still fall within a state inheritance-tax statute. Taxability depends on the state’s definition of taxable transfers and available relationship or asset exemptions. The custodian may also request state tax documentation even though the IRA is transferred directly to the named beneficiary.

Does paying inheritance tax make later IRA withdrawals federally tax-free?

No. A traditional inherited IRA’s pretax balance generally remains taxable when distributed under federal law. In some cases, federal estate tax attributable to income in respect of a decedent can generate a federal deduction under Internal Revenue Code section 691(c), but that is a different calculation. State inheritance tax does not itself create a new federal basis for the IRA.

States With a Separate Inheritance Tax on IRAs (Not Just Income Tax)

As of 2026, five states impose a separate inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Iowa no longer imposes inheritance tax for deaths occurring on or after January 1, 2025, although older Iowa estates can remain subject to earlier law.

An inheritance tax is not the same as income tax on an inherited IRA distribution. The inheritance tax is tied to the transfer at death and commonly depends on the beneficiary’s relationship to the decedent. Income tax is generally tied to taxable money later leaving a traditional IRA.

Start by asking which tax you are calculating

If a $300,000 inherited traditional IRA is transferred to a beneficiary account, there can be an inheritance-tax question at the decedent’s death and a separate income-tax question each time the beneficiary takes a distribution. The tax bases, filing deadlines, responsible parties, and exemptions can be different.

Pennsylvania demonstrates the distinction clearly: its Department of Revenue can exclude a beneficiary death-benefit payment from Pennsylvania taxable compensation, while Pennsylvania still operates a separate inheritance-tax system. Saying “Pennsylvania exempts inherited IRA distributions” is therefore incomplete unless you also ask whether inheritance tax was due on the transfer.

The current five-state list

Kentucky. Kentucky classifies beneficiaries by relationship. Class A beneficiaries receive broad exemption treatment, while Class B and Class C beneficiaries can face graduated inheritance-tax rates after their applicable exemptions.
Maryland. Maryland has an inheritance tax separate from its estate tax. Exemptions depend heavily on the beneficiary’s relationship to the decedent, and the register of wills often plays an administrative role.
Nebraska. Nebraska inheritance tax is administered through the county court process, with exemptions and rates based on relationship categories under state law.
New Jersey. New Jersey divides beneficiaries into classes. Class A beneficiaries are exempt from inheritance tax, while Class C and Class D beneficiaries can have taxable transfers under the current rate schedule.
Pennsylvania. Pennsylvania imposes relationship-based inheritance-tax rates and exemptions, including different treatment for spouses, children, siblings, and other beneficiaries.

Iowa belongs in the historical note, not the current list

Iowa phased out its inheritance tax and states that no Iowa inheritance tax is imposed for deaths occurring on or after January 1, 2025. For deaths before that date, an Iowa inheritance-tax return or residual liability can still exist under the law that applied to the decedent’s date of death.

This is exactly why copied “six inheritance-tax states” lists became stale. The correct state list must be tied to the date of death, not the publication date of an old blog post.

Relationship to the decedent usually matters more than IRA size alone

Inheritance-tax statutes commonly give the most favorable treatment to spouses and close family, while more distant relatives or unrelated beneficiaries can face higher rates or smaller exemptions. The same $200,000 IRA can therefore create no inheritance tax for one beneficiary and a material tax for another.

Do not infer the result from the federal beneficiary category. “Eligible designated beneficiary” is an Internal Revenue Code term used for RMDs. It does not determine whether someone is a Class A, Class C, lineal heir, sibling, or other relationship category under a state inheritance-tax statute.

Example: Pennsylvania child versus unrelated beneficiary

Assume an IRA owner domiciled in Pennsylvania dies with a $250,000 traditional IRA. The inheritance-tax analysis depends on who receives the account and the state’s current relationship-based rate. A surviving spouse can be treated differently from an adult child, sibling, or unrelated friend. The later federal income tax on IRA distributions is a separate calculation based on taxable withdrawals.

For Pennsylvania personal income-tax treatment of the later withdrawals, see Pennsylvania inherited IRA death-benefit treatment. The inheritance tax does not convert pretax IRA dollars into tax-free federal distributions.

Where the decedent lived can matter more than where the beneficiary lives

Inheritance taxes are generally connected to the decedent’s domicile and, for certain property, situs rules. A Florida beneficiary can therefore inherit from a Pennsylvania decedent and still need to understand Pennsylvania inheritance tax. By contrast, state income tax on the beneficiary’s later IRA distributions often follows the beneficiary’s residency.

This is another reason not to use one “state tax” line in a spreadsheet. Keep a death-transfer column and a distribution-income-tax column. See the state income-tax starting point for the second column.

An IRA beneficiary designation does not eliminate state filings

IRAs typically pass by beneficiary designation rather than through probate, but nonprobate transfer does not automatically mean no inheritance tax. State statutes can include beneficiary-designated retirement accounts in the taxable transfer base or provide special reporting procedures. The probate status of the asset and the tax status of the transfer are distinct questions.

Ask the estate’s personal representative or attorney whether the IRA was included in an inheritance-tax return and whether the custodian requires a tax waiver, consent, or other state document before transferring the account.

Do not confuse inheritance tax with estate tax

An estate tax is generally imposed on the estate based on the taxable estate before assets are distributed. An inheritance tax is generally imposed by reference to what a particular beneficiary receives and the relationship to the decedent. Maryland is unusual because it has both systems. Federal estate tax is yet another separate regime.

This article focuses on state inheritance tax because it is the category most likely to be missed when a beneficiary thinks only about Form 1099-R income.

Checklist when the decedent lived in one of the five states

Confirm the decedent’s legal domicile and date of death.
Identify your statutory relationship class under that state’s inheritance-tax law.
Ask whether the IRA or plan is included in the state inheritance-tax base and how it is valued.
Confirm who files and pays—the estate, personal representative, beneficiary, or another party under state procedure.
Separately map federal and resident-state income tax on later IRA distributions.
Use the state revenue agency or official court/treasury instructions in effect for the actual date of death.

Related Inherited IRA Guides

california inherited ira state tax

The five-state list is only the first filter; exemptions and beneficiary classes drive the actual bill

As of this 2026 review, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania retain inheritance taxes in some form. That list tells you where to investigate, not that every IRA transfer in those states is taxable. Each state has its own exempt classes, relationship categories, filing rules, and treatment of retirement assets. A spouse may be exempt where an unrelated beneficiary is taxed, and a child can receive a different rate or exemption from a sibling, friend, or more distant relative.

The decedent’s domicile is often the first geographic fact to establish. An heir who lives in Texas can still be involved in an inheritance-tax filing tied to a decedent domiciled in Pennsylvania. Conversely, the beneficiary’s residence in a state with an inheritance tax does not necessarily make every inheritance from an out-of-state decedent taxable there. Real property and other situs rules can add exceptions, so the estate representative should use the taxing state’s own instructions.

Retirement accounts also create a timing distinction. Inheritance tax can arise because the right to the account passed at death, while federal and state income tax on a traditional IRA generally arises as taxable distributions are received. Paying inheritance tax does not give the beneficiary a blanket federal income-tax basis equal to the account value. Traditional IRA amounts are generally income in respect of a decedent, subject to the IRA’s own basis rules.

Iowa is a useful warning against stale lists. Iowa’s Department of Revenue states that its inheritance tax is repealed for deaths occurring on or after January 1, 2025. An article copied from a pre-2025 chart can therefore overstate the number of current inheritance-tax states. Always anchor the question to the decedent’s date of death and the current state agency page.

Use the death date to choose the law

Inheritance-tax repeals and phaseouts commonly apply based on the decedent’s date of death. Iowa illustrates why that date must be recorded before relying on a current list: its tax is repealed for deaths on or after January 1, 2025, while older estates can remain subject to prior rules. The same discipline applies when a rate or exemption changes in another state.

Ask the estate representative for a copy of any inheritance-tax return or release so later IRA distributions are not confused with an unresolved transfer-at-death tax.

Practical note: Do not assume a custodian will calculate or withhold inheritance tax. The obligation often sits with the estate, personal representative, or beneficiary under state filing rules. Obtain the state return, appraised date-of-death account value, relationship classification, and any tax-release document before the estate file is closed.

This is general information, not personalized tax or legal advice — a CPA or estate attorney can confirm how this applies to your specific inherited account.