An inheritance tax isn’t the same as an estate tax, although both are commonly referred to as “death taxes.” An estate tax is imposed on the entire estate by a state taxing authority or the federal government. It’s based on the right of the decedent to transfer assets after death, and on the overall value of the deceased person’s entire estate. An inheritance tax is applied only to the value of a specific gift.5
Twelve states and the District of Columbia have estate taxes as of 2020. Only Maryland has both an inheritance tax and an estate tax.6
An estate is liable for paying the estate tax while the beneficiary is responsible for paying the inheritance tax.
Tennessee imposed a state death tax that was based on the overall value of the deceased person’s total property, which is technically an estate tax. But the state referred to this tax as an inheritance tax in its statutes and the tax was ultimately eliminated in 2016.7
Oregon used to call its state estate tax an inheritance tax as well, but that changed on January 1, 2012. The tax rightfully became known as what it is, an estate tax.
|Inheritance Tax||Estate Tax|
|Payable by the beneficiary||Payable by the estate|
|Based on the value of a single bequest||Based on the value of an entire estate|
|Rates graduate based on the beneficiary’s familial relationship with the deceased||A single rate typically applied to the portion of the value of an estate that exceeds an exemption amount|