Texas does not charge any inheritance tax, so heirs owe the state nothing for receiving an inheritance.
Only federal estate tax on very large estates or federal income taxes on certain inherited assets may apply.
For families planning their financial future or individuals preparing to receive assets from a loved one, a common and important question is how much is inheritance tax in Texas: Updated Jan 2026. The clear answer is that Texas does not charge an inheritance tax at all. Beneficiaries who inherit money, property, or other assets in Texas do not owe the state a tax simply for receiving an inheritance. This long-standing policy continues unchanged as of January 2026 and is now further protected under state law, offering long-term certainty for residents and heirs.
While this makes Texas one of the most inheritance-friendly states in the country, understanding the full tax picture still matters. Federal estate taxes, income taxes on certain inherited assets, and property taxes can still affect how much wealth ultimately stays in a family. This in-depth article explains the current rules, clears up common confusion, and outlines what Texans need to know to plan wisely.
Table of Contents
Texas Has No Inheritance Tax
Texas does not impose an inheritance tax on heirs. When a person dies and leaves assets to beneficiaries, the state does not collect a tax based on the value of what each heir receives. This applies to all types of inheritances, including cash, real estate, investments, vehicles, business interests, and personal property.
There is no distinction based on the heir’s relationship to the deceased. Spouses, children, grandchildren, extended family members, and non-relatives are all treated the same under Texas law. No inheritance tax return is required, and no percentage of the inheritance is owed to the state.
This policy allows beneficiaries to receive the full value of their inheritance without a Texas-level tax reduction.
Texas Also Does Not Have a State Estate Tax
In addition to having no inheritance tax, Texas does not levy a state estate tax. Estate taxes differ from inheritance taxes in that they are charged against the estate itself before assets are distributed to heirs. Some states impose estate taxes when an estate exceeds a certain value, but Texas eliminated this type of tax years ago.
As of January 2026, estates of individuals who die while domiciled in Texas are not subject to any state estate tax. The estate does not owe Texas a tax before distributing assets, which preserves more wealth for beneficiaries and simplifies estate administration.
Permanent Legal Protection Against Death Taxes
Texas has taken its tax-friendly approach a step further by permanently prohibiting inheritance and estate taxes. In late 2025, voters approved a constitutional amendment barring the state from ever imposing a tax on a decedent’s estate, inheritance, or property transfers at death.
This amendment ensures that Texas lawmakers cannot introduce an inheritance tax or estate tax in the future without changing the state constitution. For families planning long-term wealth transfers, this offers stability and predictability that few states can match.
Federal Estate Tax Still Exists
Although Texas does not tax inheritances or estates, federal estate tax law still applies nationwide. The federal estate tax is assessed on the total value of a deceased person’s estate before assets are passed on to heirs, but only when the estate exceeds a very high exemption threshold.
As of January 2026, the federal estate tax exemption stands at $15 million per individual. For married couples, estate planning rules allow unused exemption amounts to be transferred to the surviving spouse, effectively raising the combined exemption to $30 million for qualifying couples.
Estates valued below these thresholds do not owe federal estate tax. Estates that exceed them may owe federal tax on the portion above the exemption.
How Federal Estate Tax Works
Federal estate tax applies to the gross value of all assets owned by the decedent at death. This includes real estate, investment accounts, bank accounts, retirement assets, business interests, certain life insurance proceeds, and personal property.
If the estate’s total value exceeds the exemption, the estate itself pays the tax before assets are distributed. Heirs do not personally pay the federal estate tax, but the tax can reduce the amount they ultimately receive.
Federal estate tax rates increase as the taxable value rises and can reach as high as 40% on the largest taxable amounts. Despite this, the vast majority of estates never owe federal estate tax due to the high exemption levels.
Why Most Texans Will Never Owe Estate or Inheritance Tax
Because Texas has no inheritance or estate tax and the federal exemption is so high, most Texans will never encounter a death-related tax. For middle-income and even many upper-income families, assets pass to heirs without being reduced by state or federal estate taxes.
This reality often surprises people who assume all inheritances are taxed. In Texas, the absence of these taxes makes wealth transfers simpler and more efficient for most families.
Income Tax on Inherited Assets
While Texas does not tax inheritances and has no state income tax, federal income tax may still apply to certain inherited assets. The inheritance itself is not considered taxable income, but income generated by inherited assets often is.
For example, if you inherit a traditional IRA or 401(k), distributions taken from that account are generally subject to federal income tax. The same is true for interest, dividends, or rental income earned from inherited property.
Understanding the difference between receiving an inheritance and earning income from inherited assets is essential for proper tax planning.
Capital Gains and Inherited Property
When an heir sells inherited property, capital gains tax rules may apply. Federal law provides a stepped-up basis for inherited assets, meaning the asset’s tax basis is reset to its fair market value at the time of the original owner’s death.
This rule can significantly reduce capital gains taxes. If an inherited home or investment is sold soon after inheritance, there may be little or no taxable gain. However, if the asset appreciates after inheritance, gains above the stepped-up value may be taxed when sold.
Texas does not impose a capital gains tax, but federal capital gains tax still applies.
Property Taxes on Inherited Real Estate
Inherited real estate in Texas remains subject to property taxes. Texas relies heavily on property taxes to fund local services, and rates can be higher than in many other states.
When property changes ownership due to inheritance, the county appraisal district may reassess its value. Heirs should be prepared for potential changes in property tax bills and should understand available exemptions.
Primary residence heirs may qualify for a homestead exemption, while seniors, disabled individuals, and surviving spouses may qualify for additional reductions. These exemptions can help manage ongoing property tax costs.
Estates and Trusts: Income Tax Considerations
Even in Texas, estates and trusts can owe federal income tax on income earned before distribution. This includes interest, dividends, rental income, and business earnings generated by estate or trust assets.
Once income is distributed to beneficiaries, the tax responsibility generally shifts to the beneficiary. Although Texas does not tax income, federal reporting requirements still apply.
Proper estate administration helps ensure income is reported correctly and avoids unnecessary penalties.
Non-Residents Inheriting Texas Assets
Non-residents who inherit assets located in Texas also benefit from the state’s lack of inheritance tax. Texas does not tax heirs based on residency, so beneficiaries living in other states or countries do not owe Texas inheritance tax.
However, non-resident heirs may need to consider tax laws in their home state or country, particularly regarding income generated by Texas-based property.
Why Estate Planning Still Matters in Texas
Even without inheritance or estate taxes, estate planning remains critical. A well-crafted plan ensures assets are distributed according to personal wishes, reduces legal disputes, and minimizes delays during probate.
Estate planning also helps manage federal tax exposure, protect minor children, plan for incapacity, and coordinate beneficiary designations. Wills, trusts, powers of attorney, and advance medical directives all play important roles.
For families with significant assets or complex situations, proactive planning provides clarity and peace of mind.
Texas Compared With Other States
Texas stands out nationally for its favorable tax treatment of inheritances. Several states still impose inheritance taxes, estate taxes, or both, often with exemption thresholds far lower than federal levels.
In those states, heirs may lose a portion of their inheritance to state taxes. By contrast, Texas allows wealth to pass between generations with fewer tax barriers, making it attractive for retirees and long-term residents.
Common Misunderstandings About Inheritance in Texas
Many people confuse inheritance tax with income tax or assume federal estate tax applies to all estates. In reality, Texas heirs do not pay inheritance tax, and federal estate tax affects only very large estates.
Another misconception is that inheriting property automatically triggers taxes. In Texas, receiving the property itself is not taxable, though future income or gains may be.
Clearing up these misunderstandings helps families plan with confidence.
Preparing for an Inheritance in Texas
If you expect to receive an inheritance, document what assets you will receive and understand how each may be taxed in the future. Plan for property taxes, income tax on distributions, and potential capital gains if assets are sold.
Professional guidance can help heirs manage assets responsibly and align decisions with long-term financial goals.
The Bottom Line for Texans
So, how much is inheritance tax in Texas? The answer remains zero. Texas imposes no inheritance tax and no state estate tax, and state law now permanently protects this position. While federal estate tax, income tax, and property tax considerations still matter, most Texans will receive inheritances without state-level tax loss.
Understanding the full picture empowers families to preserve wealth, reduce stress, and plan confidently for the future.
Do you have questions or personal experiences related to inheritance or estate planning in Texas? Share your thoughts and stay engaged for ongoing insights.
