Do You Pay Inheritance Tax on a House?

Educational guide — not legal or tax advice. Inheritance and estate tax rules vary substantially by state and change over time. Consult a CPA or estate attorney about your specific situation.

The honest one-paragraph answer

For the vast majority of Americans inheriting a house: no, you don’t pay inheritance tax on it.

There’s no federal inheritance tax at all — that’s a different country’s system. The US has federal estate tax (paid by the estate, not the heir) with a $13.99 million exemption per person in 2025, which fewer than 0.1% of estates owe. A small handful of states have their own inheritance taxes, but the rest don’t.

And on top of that, inherited real estate gets a step-up in cost basis under the federal income tax code, which usually eliminates capital gains tax even if you sell the property soon after inheriting.

For most people, an inherited house transfers without any tax bill. The complications below apply only in specific situations.

Two concepts often confused: inheritance tax vs. estate tax

These are different things that get called by the same name in casual conversation:

Estate tax (paid by the estate)

A tax levied on the estate before anything is distributed to heirs. The estate pays the tax; the heirs receive whatever’s left.

• Federal estate tax: Only applies to estates above the federal exemption — $13.99 million per person in 2025 (essentially $27.98M for married couples using portability). Top rate is 40%. Most Americans never owe this.
• State estate tax: A dozen states plus DC have their own estate tax with lower thresholds (Massachusetts at $2M, Oregon at $1M, Washington at ~$2.2M, etc.).

Inheritance tax (paid by the heir)

A tax levied on the recipient of the inheritance, with the rate often depending on the heir’s relationship to the deceased.

• No federal inheritance tax. The US does not have one.
• Only six states had a state inheritance tax recently:
  • Pennsylvania (0%–15% depending on relationship)
  • New Jersey (0%–16% — but spouse and lineal descendants are exempt)
  • Kentucky (0%–16% depending on relationship)
  • Iowa (phasing out — fully repealed for deaths on or after January 1, 2025)
  • Maryland (0%–10% — spouse and direct descendants exempt; Maryland also has an estate tax)
  • Nebraska (recently phased out)

If you inherit from someone who lived in any state outside that list, there is no state inheritance tax, period.

Specifically: do you pay inheritance tax on a house?

For most situations, no. Here’s the breakdown by scenario.

Scenario 1: Federal level

You inherit a house anywhere in the US. The federal government does not impose an inheritance tax on you. If the total estate (house + everything else) was above $13.99 million per person, the estate itself may owe federal estate tax — but that’s the estate’s problem, not yours as the heir.

Scenario 2: State estate tax states

If the deceased lived in (or owned real estate in) a state with a state estate tax — Massachusetts, New York, Oregon, Washington, Hawaii, Illinois, Maine, Maryland, Minnesota, Rhode Island, Vermont, Connecticut, DC — the estate may owe state estate tax if it exceeds that state’s threshold. Thresholds vary widely:

• Oregon: $1 million
• Massachusetts: $2 million
• Washington: ~$2.2 million
• New York: $7.16 million (2025, adjusts annually)
• Connecticut: aligned with federal

If the estate (including the house’s value) is above the threshold, the estate pays the tax before distributing assets. You as the heir don’t write a check.

Scenario 3: State inheritance tax states

If you inherit from someone who lived in Pennsylvania, New Jersey, Kentucky, Iowa, or Maryland, you may owe state inheritance tax on what you receive — including real estate.

The rate depends on your relationship to the deceased:

Relationship	Typical PA rate	Typical NJ rate	Typical KY rate
Surviving spouse	0%	0%	0%
Child / lineal descendant	4.5%	0%	0%
Sibling	12%	11–16%	4–16%
Niece, nephew, friend, unrelated	15%	15–16%	6–16%

So in Pennsylvania, a child inheriting a $400,000 house pays roughly $18,000 in PA inheritance tax (4.5%). A sibling inheriting the same house pays roughly $48,000 (12%). A friend inheriting it pays roughly $60,000 (15%).

This is the practical concern most people have when they ask about inheritance tax on a house. It only applies in those specific states. For everyone else, there’s no state inheritance tax.

Scenario 4: The house is in a different state than where the deceased lived

This is where it gets specific. If the deceased lived in Florida (no inheritance tax) but owned a vacation house in Pennsylvania (inheritance tax state), Pennsylvania may impose its inheritance tax on the value of the PA property regardless of where the deceased lived. State inheritance taxes generally apply to property located in the state.

Capital gains tax: the stepped-up basis

Even when there’s no inheritance tax, people sometimes worry about capital gains tax when they sell an inherited house. There’s good news here: inherited property gets a step-up in cost basis under IRC §1014.

What that means:

• The cost basis of inherited property is its fair market value on the date of death (or, in some cases, six months after).
• If you sell the property soon after inheriting it, your capital gain is calculated against that stepped-up basis — typically close to zero gain.
• Decades of appreciation on the deceased’s watch are effectively erased for tax purposes.

A worked example. Your parent bought a house in 1985 for $80,000. They die in 2026 when the house is worth $500,000. You inherit it.

• Without step-up: if you sold for $500,000, you’d owe capital gains tax on $420,000.
• With step-up: your basis becomes $500,000 (date-of-death value). If you sell for $510,000 a year later, your taxable gain is just $10,000.

This is one of the most generous tax provisions in the US code. It eliminates most capital gains tax on inherited real estate.

A few details that matter:

• Each spouse’s death triggers a step-up on their share. In community property states (CA, TX, etc.), the entire jointly-held property usually gets a stepped-up basis when the first spouse dies.
• Step-up applies to inheritances, not gifts. A house given to you during the giver’s lifetime keeps the giver’s original cost basis.
• The Tax Cuts and Jobs Act (TCJA) preserved the step-up at death; it’s been on the chopping block in several political cycles but is still in effect as of 2026.

Property tax: a different question

People sometimes conflate inheritance tax, estate tax, and property tax — they’re three different things.

• Property tax is an ongoing tax based on the property’s value, paid annually by whoever owns the property. Inheriting a house means you’re now responsible for property tax going forward.
• Some states (notably California with Proposition 19) have rules that reassess property values when ownership changes, potentially raising the property tax bill substantially. Children inheriting a parent’s primary residence in California get limited protection from this, but the rules narrowed significantly in 2021.

Property tax considerations are real but separate from inheritance/estate tax.

What about the mortgage?

If the inherited house has an outstanding mortgage, the mortgage doesn’t disappear — it remains attached to the property. Options:

• Assume the mortgage if the lender allows and you can qualify.
• Refinance the mortgage into your name.
• Pay it off from estate assets or your own funds.
• Sell the house and pay off the mortgage from sale proceeds.

The Garn-St. Germain Act (federal law) protects close relatives — particularly surviving spouses — from being forced to immediately pay off (“accelerate”) a mortgage when they inherit. The lender can’t force a due-on-sale call if the heir is a close relative.

For a non-relative inheriting a property with a mortgage, the lender may technically have the right to accelerate, but in practice most lenders allow assumption or refinancing.

What if the house is in a trust?

If the deceased held the house in a revocable living trust, the house passes to the named beneficiaries without going through probate, but tax treatment is largely the same:

• No federal inheritance tax (because there isn’t one).
• State inheritance tax may still apply if the deceased lived in PA, NJ, KY, IA, or MD.
• State estate tax may still apply if the estate exceeds the threshold.
• Step-up in basis still applies.

The trust avoids probate but doesn’t change the tax treatment.

A simple decision tree

To figure out whether you owe tax on an inherited house:

1. Is the total estate above the federal exemption ($13.99M)? If no, no federal estate tax.
2. Did the deceased live in a state with state estate tax (MA, NY, OR, WA, etc.)? If yes, check the state threshold; the estate pays state estate tax before distribution.
3. Did the deceased live in PA, NJ, KY, IA, or MD? If yes, you may owe state inheritance tax based on your relationship to the deceased.
4. Are you in any of the above categories? If no — you owe no inheritance or estate tax on the house.
5. Step-up in basis eliminates most capital gains tax if you sell soon after inheriting.

For most US heirs, the path through this decision tree ends at “no tax.”

When to talk to a CPA

A few situations where professional tax help is genuinely worth the cost:

• The estate is large enough that state or federal estate tax may apply.
• The deceased lived in one of the inheritance tax states.
• You’re inheriting from a non-spouse, non-lineal-descendant family member in PA, NJ, KY, or MD.
• The house was held in a complex ownership structure (trust, partnership, LLC).
• You plan to sell soon and want to confirm the stepped-up basis calculation.
• The estate has cross-border (international or multi-state) elements.

For straightforward inheritances of a primary residence by a spouse or child, the tax picture is usually simple and a CPA call is optional.

Related reading

• What Is Estate Planning (and Do You Actually Need One?)
• What Is Probate and How Does It Work?
• Will vs. Trust: Which Do You Need?
• Is Life Insurance Taxable to the Beneficiary?
• What to Do When Someone Dies: A Step-by-Step Checklist

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Educational information only — not legal, tax, or financial advice. Federal and state tax rules change. Consult a CPA or tax attorney about your specific situation. Sources: IRS estate and gift tax guidance; IRS Publication 559 (Survivors, Executors, and Administrators); state Departments of Revenue (PA, NJ, KY, IA, MD); 26 U.S. Code §1014.