Does Texas Have an Inheritance Tax? Do Beneficiaries Pay Tax?

If someone you love has died and left you money, a house or a retirement account, one of the first questions is usually whether you owe the state a cut. The good news: there is no Texas inheritance tax. Texas repealed it years ago, and in 2025 voters wrote a ban on inheritance and estate taxes into the Texas Constitution. That does not mean every inheritance is completely tax-free, though. Federal estate tax, another state’s inheritance tax, and income tax on retirement accounts can still come into play. Here is what Texas heirs actually need to know.

Why There Is No Texas Inheritance Tax

Texas once had an inheritance tax on the books, but it was tied to a federal credit for state death taxes. When Congress phased that credit out in 2005, the Texas tax stopped collecting anything. In 2015 the Legislature formally repealed it (Senate Bill 752, which removed Chapter 211 of the Texas Tax Code).

Then, on November 4, 2025, Texas voters approved Proposition 8 by a wide margin. It added Section 26 to Article VIII of the Texas Constitution, which prohibits the Legislature from imposing a tax on a decedent’s property or on the transfer of an estate, inheritance, legacy, succession or gift. A future Legislature cannot bring back a Texas inheritance tax with an ordinary bill. It would take another constitutional amendment.

Texas also has no state estate tax. So when a Texas resident dies, the state takes nothing because of the death itself.

Inheritance Tax vs. Estate Tax: What Is the Difference?

People use the two terms interchangeably, but they work differently:

• Estate tax is charged to the estate of the person who died, based on the total value of everything they owned. It is paid before the heirs receive their shares.
• Inheritance tax is charged to the person who receives the property. The rate usually depends on how closely related the heir was to the person who died. Spouses are exempt in every state that has one.

The federal government has an estate tax but no inheritance tax. Texas has neither.

The Federal Estate Tax in 2026

Under the One Big Beautiful Bill Act, signed in July 2025, the federal estate tax exemption is $15 million per person for deaths in 2026, and it will be adjusted for inflation going forward. A married couple can shelter $30 million when the surviving spouse keeps the first spouse’s unused exemption through a “portability” election. Amounts above the exemption are taxed at up to 40%.

Most Texas families will never owe federal estate tax. Even so, the surviving spouse should usually file an estate tax return (Form 706) after the first death to lock in portability. We explain why in Portability in Texas: Why a Surviving Spouse Should File Form 706. For larger estates, our estate tax planning page covers the trusts and gifting strategies that reduce or eliminate the tax.

When a Texan Can Still Owe Another State’s Inheritance Tax

Five states still have an inheritance tax in 2026: Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Iowa repealed its tax for deaths on or after January 1, 2025.

What matters is where the person who died lived, and where any real estate is located, not where the heir lives. If your mother lived in Pennsylvania and left you her savings, Pennsylvania inheritance tax can apply even though you live in Austin. And if a Texas resident owns a rental house or vacation home in one of those states, that state may tax the property when the owner dies.

Each state treats family members differently. Children are fully exempt in some of these states (such as New Jersey, Maryland and Kentucky) but pay a reduced rate in others (such as Pennsylvania and Nebraska). More distant relatives and friends usually pay the highest rates. If you are inheriting from someone in one of these states, talk to an attorney or CPA there about the filing deadline, because some states offer a discount for paying early and charge interest for paying late.

Do Beneficiaries Pay Income Tax on an Inheritance?

Generally, no. Under federal law, the money or property you inherit is not income to you. But a few assets come with income tax attached:

• Inherited traditional IRAs and 401(k)s. Every withdrawal is taxed as ordinary income to you. Most adult children and other non-spouse beneficiaries must empty the account within 10 years of the owner’s death, so the timing of withdrawals matters. A surviving spouse has more options, including rolling the account into their own IRA.
• Inherited Roth IRAs. Withdrawals are usually tax-free if the account was open at least five years, though most non-spouse beneficiaries still have to empty it within 10 years.
• Income the assets earn after death. Interest, dividends and rent earned after the date of death are taxable to whoever receives them, whether that is the estate, the trust or you.
• Selling inherited property. Capital gains tax applies only to growth after the date of death, thanks to the step-up in basis described below.

The Step-Up in Basis: Why Inherited Property Is Usually Tax-Friendly

When you inherit a house, land or stock, its tax basis generally “steps up” to its value on the date of death. If your parents bought their home for $90,000 and it was worth $500,000 when they died, your basis is $500,000. Sell it soon after for that amount and you owe little or no capital gains tax.

Texas couples get an extra advantage. Because Texas is a community property state, both halves of community property can get a new basis when the first spouse dies, not just the deceased spouse’s half. See Texas Community Property and the Double Step-Up in Basis.

This is also why giving your house to your children while you are alive is often a mistake. A lifetime gift carries over your original basis, and the step-up is lost. We cover better options in Don’t Deed Your House to Your Kids in Texas.

Taxes the Estate Pays Before Heirs Are Paid

Even with no Texas inheritance tax, the executor or trustee still has tax work to do before distributing the estate:

• File the deceased person’s final personal income tax return for the year of death.
• File an income tax return for the estate or trust (Form 1041) if it earns enough income while it is being settled.
• Pay any property taxes due on real estate, which continue to accrue after death.
• File a federal estate tax return if the estate is large enough to require one, or if the surviving spouse wants portability.

Our free Texas probate checklist walks through these steps and the rest of the work after a death.

Gifts While You Are Alive

Because Proposition 8 also covers gifts, Texas cannot tax gifts either. The federal gift tax still applies, but in practice very few people pay it. You can give up to $19,000 per person per year in 2026 without filing a gift tax return, and larger gifts simply use up part of your $15 million lifetime exemption. See Lifetime Gifting in Texas: 2026 Gift Tax Limits and Smart Strategies.

How Planning Keeps More of Your Estate in Your Family

Since most Texas families will never owe a death tax, the bigger costs are usually probate delays, court costs and income taxes that could have been avoided. A good plan addresses all three:

• A living trust keeps your home and accounts out of probate, and funding it correctly preserves the step-up in basis.
• Up-to-date beneficiary designations on IRAs and 401(k)s let your heirs spread out withdrawals over time and manage their income taxes.
• If you own property in an inheritance tax state, holding it in your trust can avoid a second probate there, and an attorney can tell you whether that state’s tax will still apply.

Frequently Asked Questions

Does Texas have an inheritance tax in 2026?

No. Texas repealed its inheritance tax in 2015, and since Proposition 8 passed in November 2025, the Texas Constitution prohibits the Legislature from creating a new one.

Does Texas have an estate tax?

No. Only the federal estate tax can apply, and only to estates worth more than $15 million per person in 2026.

Do I have to report an inheritance on my tax return?

Usually not. Inherited money and property are not taxable income. You do report withdrawals from an inherited traditional IRA or 401(k), income the property earns after the date of death, and any gain if you sell inherited property for more than its value at death.

I live in Texas, but my father lived in New Jersey. Do I owe inheritance tax?

It depends on the state. New Jersey taxes property passing to more distant relatives and friends, but children, spouses, parents and grandchildren are exempt. The rules turn on where your father lived, not where you live, so check that state’s rules for your relationship.

Who pays the federal estate tax, the estate or the heirs?

The estate. The executor pays it from estate assets before distributing what is left to the heirs.

Do I pay capital gains tax on an inherited house in Texas?

Only on the increase in value after the date of death. If you sell soon after inheriting, there is often little or no gain to tax.

Inherited property or planning to leave it to your family? Call (512) 737-8404 or book a free consultation, and we will walk through what taxes, if any, apply and how to keep more of your estate in your family.

Reviewed by Turner Henington, attorney, Texas Bar No. 24148206 · Updated November 2026