Guides

Texas Inheritance Tax: What You Actually Owe

By The Ledgerism Editorial Team · The Ledgerism Brief Editorial Team produces original, methodology-disclosed accounting and tax research—data trackers, databases, and reference guides built to be the most-cited source in the field. Every figure is verified against primary sources including FASB, the IRS, the PCAOB, NASBA, the AICPA, and state boards of accountancy.

There is no Texas inheritance tax, and there is no Texas estate tax. Texas repealed its inheritance tax in 2015 (House Bill 254), and a 2025 constitutional amendment now bars the legislature from creating a new one. If you inherit from a Texas resident, you generally receive the assets free of any state-level death tax. What can still apply is the federal estate tax on very large estates, income tax on certain inherited accounts, and, in some cases, another state’s inheritance tax if property or the decedent sits outside Texas.

This guide separates the three taxes people confuse: the state death tax (none in Texas), the federal estate tax (paid by the estate, not the heir), and income tax on inherited assets (which can apply regardless of state).

Does Texas have an inheritance tax?

No. Texas does not levy an inheritance tax or a state estate tax as of 2026. An inheritance tax is charged to the person who receives assets. Texas repealed its version through House Bill 254 in 2015, and voters approved a constitutional amendment in 2025 that prohibits any future state death tax. Heirs of Texas residents owe $0 in state death tax on the transfer itself.

Texas is one of the majority of states with no death tax at all. It has no estate tax (charged to the estate before distribution) and no inheritance tax (charged to the beneficiary after distribution). The state also has no gift tax and no state income tax, which removes several layers other states impose.

That absence does not mean an inheritance is always tax-free. The federal government still taxes the largest estates, the IRS still taxes income generated by inherited assets, and property located in another state follows that state’s rules, not Texas rules.

Estate tax vs inheritance tax: the difference that matters

An estate tax is paid by the estate before assets pass to heirs; an inheritance tax is paid by each beneficiary on what they receive. Texas imposes neither. The federal government imposes only an estate tax, not an inheritance tax. This distinction decides who writes the check and when.

The practical takeaway: a Texas heir never owes a federal inheritance tax, because no such tax exists. The only federal death tax is the estate tax, and it is settled by the estate on Form 706 before the heir receives anything.

When the federal estate tax still applies

The federal estate tax applies only when a decedent’s taxable estate exceeds the federal exemption, set at $15 million per person for deaths in 2026 under the One Big Beautiful Bill Act (OBBBA). Estates below that owe no federal estate tax. Above it, the rate on the excess reaches 40%. A married couple can shield up to $30 million combined using portability.

The 2026 figure of $15 million is a permanent, inflation-indexed exemption (up from $13.99 million in 2025), and OBBBA canceled the scheduled 2027 drop back toward roughly $7 million. Annual inflation adjustments begin in 2027.

Two mechanics widen the shield in practice:

1. The unlimited marital deduction. Assets left to a U.S. citizen spouse pass free of estate tax regardless of value, deferring any tax until the second death.
2. Portability. A surviving spouse can add the deceased spouse’s unused exemption to their own by filing Form 706 on time, which is how couples reach the roughly $30 million combined figure.

Because Texas has no estate tax of its own, a Texas estate under the federal threshold typically files no death tax return at all. Estates above the threshold file the federal Form 706 estate tax return; the estate, not the beneficiary, pays. For the national data on how few estates actually cross this line, see our estate and gift tax report.

Inherited property and the step-up in basis

Most inherited assets receive a “step-up” in cost basis to fair market value on the date of the decedent’s death under IRC Section 1014. This can erase capital gains that built up during the decedent’s lifetime, so an heir who sells shortly after inheriting often owes little or no capital gains tax. The step-up applies regardless of state and is often the single largest tax benefit an heir receives.

Example: a parent bought a Houston rental house for $120,000 and it is worth $500,000 at death. The heir’s basis steps up to $500,000. If the heir sells for $510,000, the taxable gain is $10,000, not $390,000. The pre-death appreciation is wiped out.

The step-up cuts both ways. Assets that lost value get a “step-down” to the lower date-of-death value. Certain assets do not step up, most notably tax-deferred retirement accounts such as traditional IRAs and 401(k)s, because those were never taxed. Withdrawals by a beneficiary are taxed as ordinary income.

For the mechanics and worked numbers, see our guides on the Section 1014 step-up in basis and how to calculate cost basis.

The out-of-state trap: when a Texas heir owes another state

Living in Texas does not shield you from another state’s inheritance tax. Five states still levy an inheritance tax in 2026: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Whether it applies usually depends on where the decedent lived or where the inherited property sits, not on where the heir lives. A Texas beneficiary can owe tax to one of these states.

Two common triggers:

• The decedent lived in an inheritance-tax state. If your uncle died a Pennsylvania resident and left you cash, Pennsylvania can tax that inheritance based on your relationship to him, even though you live in Texas.
• You inherit real property located in an inheritance-tax state. A vacation home in Maryland can fall under Maryland’s rules regardless of the heir’s Texas residency.

Iowa repealed its inheritance tax effective January 1, 2025, leaving five states. In every one, the tax rate typically scales with how closely related the heir is to the decedent: spouses and children usually pay little or nothing, while unrelated heirs pay the most.

Income tax on what you inherit

Receiving an inheritance is not itself taxable income, but income the inherited assets generate afterward usually is. Interest, dividends, rent, and capital gains after the step-up are taxable to the heir at the federal level. Texas has no state income tax, so a Texas heir avoids state income tax on that income, though federal tax still applies.

The main exception is tax-deferred retirement money. Distributions from an inherited traditional IRA or 401(k) are taxed as ordinary income when withdrawn, and most non-spouse beneficiaries must empty the account within 10 years under the SECURE Act rule. These distributions are reported to the beneficiary on Form 1099-R.

Texas Inheritance Tax FAQ

Do I have to pay taxes on inheritance in Texas?

Not at the state level. Texas has no inheritance tax, no estate tax, and no state income tax, so receiving an inheritance from a Texas resident triggers no Texas tax. You may still face federal estate tax if the estate exceeds ~$15 million (2026), and federal income tax on income the assets later produce, including distributions from inherited retirement accounts.

How much can you inherit in Texas without paying taxes?

At the state level there is no cap, because Texas imposes no death tax. Federally, an estate can pass up to the $15 million per-person exemption in 2026 with no estate tax, or up to about $30 million for a married couple using portability. Amounts above the exemption are taxed to the estate at up to 40%, not to the heir.

Is there a federal inheritance tax?

No. The federal government has an estate tax, paid by the estate before distribution, but no inheritance tax paid by beneficiaries. So a Texas heir never owes a federal inheritance tax. The only federal death tax is the estate tax, and it applies only to estates above the ~$15 million exemption for 2026 deaths.

Do I owe tax if I inherit a house in Texas?

Generally no tax on receiving it. The house’s basis steps up to its fair market value at the date of death under Section 1014, so if you sell soon after, capital gains tax is often minimal. Texas has no state inheritance or estate tax and no state income tax, though you assume ongoing local property taxes as the new owner.

Can I owe another state’s inheritance tax if I live in Texas?

Yes, in some cases. If the person who died lived in Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, or if you inherit real property located in one of those states, that state’s inheritance tax can apply to you despite your Texas residency. The tax usually follows the decedent’s residence or the property’s location, not the heir’s.

Are inherited IRAs and 401(k)s taxed in Texas?

Not by Texas, which has no income tax. But federal income tax applies to withdrawals from an inherited traditional IRA or 401(k), because that money was never taxed and does not receive a step-up. Most non-spouse beneficiaries must withdraw the full balance within 10 years under the SECURE Act, with each distribution taxed as ordinary income.

Did Texas ever have an inheritance tax?

Yes. Texas historically had a “pick-up” inheritance tax tied to a federal credit, but it collected nothing after that federal credit was phased out in 2005. The state formally repealed the tax through House Bill 254 in 2015, and a 2025 constitutional amendment now prohibits the legislature from reinstating any state death tax.

Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.

Related guides

• Ohio Commercial Activity Tax (CAT), Explained
• State vs Federal Income Tax
• Virginia State Income Tax
• Ohio State Income Tax
• California State Income Tax
• States With No Income Tax in 2026