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.
When planning your estate or expecting an inheritance in the Lone Star State, one of the first questions that comes up is how much is inheritance tax in Texas: Updated Jan 2026, and the simple answer is that Texas does not impose an inheritance tax on beneficiaries. This means that if you inherit money, property, or other assets from someone who lived in Texas, you will not owe any state tax on that inheritance solely because you received it. This tax-friendly stance has significant implications for families, retirees, and long-term financial planning in Texas, but it is only one piece of the broader tax and estate landscape that residents and heirs should understand as of January 2026.
In this comprehensive guide, we will walk through the full picture of inheritance taxation in Texas as it stands today, including federal estate taxes, how inherited assets are taxed or exempted, planning strategies, and how Texas compares with other states. You’ll learn what taxes matter, which ones don’t, and what families can do to protect their wealth and pass it on efficiently.
Texas Has No State Inheritance Tax
Texas does not levy an inheritance tax on individuals who inherit assets after someone’s death. When you receive an inheritance like cash, real estate, investments, or personal property from someone who passed away, the state does not charge a tax on that inheritance. Beneficiaries do not owe Texas tax simply because they received a transfer of wealth due to a death. This applies whether you are a close relative, distant relative, or non-relative beneficiary.
This lack of inheritance tax makes Texas one of many states that encourage wealth transfers without levying state death taxes on heirs. Families can benefit from this policy by preserving more of the value passed down from one generation to the next without a state tax bite upon receipt.
Texas Also Has No State Estate Tax
In addition to not charging an inheritance tax, Texas also does not impose a state estate tax. An estate tax is levied on the total value of a deceased person’s estate before assets are distributed to heirs. Some states charge this on high-value estates, reducing the amount available to beneficiaries, but Texas eliminated its state estate tax years ago.
Texas lawmakers and voters have reinforced this stance, including through a constitutional amendment approved in 2025 that prohibits state lawmakers from enacting a tax on a decedent’s property or on the transfer of estates or inheritances going forward. Under this amendment, the state cannot impose an estate, inheritance, or death tax after January 1, 2025, protecting Texans from future state death taxes.
Federal Estate Tax Still Matters for Large Estates
Although Texas does not impose its own death taxes, the federal government still has an estate tax that can affect the transfer of wealth at death. The federal estate tax applies to the total value of a person’s estate before distribution to heirs when that total value exceeds a specific exemption threshold.
For 2026, the federal estate tax exemption was significantly increased to $15 million per individual and $30 million for married couples under new federal tax law changes enacted in 2025. Estates valued below these thresholds will not owe federal estate tax. However, estates that exceed these exemption amounts will owe federal tax on the amount above the threshold.
Federal estate tax rates can reach up to 40% on the taxable portion of an estate. This tax is paid by the estate itself before distribution to heirs, which can reduce the total assets available to beneficiaries. For most estates, however, the high exemption means many families will not trigger federal estate tax.
Understanding Federal Estate Tax and Its Impact
Federal estate tax applies only to “gross estate” values that include all of a decedent’s assets: real estate, investments, business interests, retirement accounts, life insurance (if included in the estate), and personal property. If the total estate value exceeds the exemption, then federal tax rules kick in before assets are passed on.
The federal estate tax is complex, with rates that increase as the taxable amount rises above the exemption. For example, smaller amounts over the exemption may face lower rates, while larger amounts are taxed at higher rates, up to 40% for the largest estates. Since the tax is on the estate and not on the beneficiaries, heirs typically receive their inheritance after the estate settles any tax liability.
Texas residents with significant wealth should be aware of these rules and consider planning strategies that may help reduce taxable estate value within federal guidelines.
Income Tax on Inherited Assets in Texas
Even though Texas does not tax inheritance, some inherited assets may trigger income tax obligations. Texas does not have a state income tax, but federal income tax still applies to certain kinds of inherited assets.
For example, traditional retirement accounts like IRAs and 401(k)s are typically taxable when distributed. If you inherit one of these accounts and take a distribution, that distribution is usually included in your federal taxable income for the year. This applies even though the state does not tax income.
Income generated by inherited property—such as rental earnings, dividends from stocks, or interest from bonds—also forms part of a beneficiary’s federal taxable income. These income tax rules are separate from inheritance and estate tax and apply regardless of Texas’s state tax stance.
Capital Gains Tax on Inherited Property
When an heir sells inherited property, capital gains tax may apply on the difference between the sale price and the property’s stepped-up tax basis. The stepped-up basis generally means that the property’s tax basis becomes its fair market value at the date of the decedent’s death.
This step-up can significantly reduce capital gains tax if the property is sold soon after inheritance. However, any value increase above the stepped-up basis between the date of death and the date of sale may be subject to capital gains tax at the federal level.
Texas does not impose its own capital gains tax, but heirs should be aware that federal capital gains tax may apply when selling inherited assets.
Property Taxes on Inherited Real Estate in Texas
Heirs who receive real estate in Texas will still owe ongoing property taxes. Texas has some of the higher property tax rates compared with other states, and inherited property is no exception to these obligations.
Property tax is based on the assessed value of the property in the county where it is located. Inherited property does not automatically qualify for exemption from property tax. However, heirs may be eligible for various property tax exemptions, including homestead exemptions for primary residences, exemptions for seniors, disabled individuals, or surviving spouses.
Property tax bills should be budgeted for when inheriting real estate in Texas, as they can add a significant recurring cost.
Fiduciary Income Tax for Estates and Trusts
Estates and trusts in Texas may owe federal income tax on income earned before distribution to heirs. While Texas imposes no state income tax, the federal government taxes trusts and estates on undistributed income according to its own tax brackets.
Once income is distributed to beneficiaries, the individual beneficiaries are responsible for reporting that income on their federal tax returns. This does not constitute an inheritance tax but can affect the overall tax situation following an inheritance.
How Texas Compares to Other States on Inheritance Tax
In terms of inheritance and estate taxation, Texas ranks among states with the most favorable tax environments for wealth transfer. Many states impose either a state estate tax or an inheritance tax or both, often with exemption amounts much lower than federal levels.
By contrast, Texas’s constitutional protection against death taxes and its lack of both inheritance and state estate tax make it attractive for retirees, families, and wealth holders who want to preserve legacy and reduce tax burdens on beneficiaries.
Texas’s overall tax advantages go beyond inheritance: the state also has no personal income tax, adding to its appeal for individuals planning long-term financial stability.
Estate Planning Still Matters in Texas
Even though there is no state inheritance tax or estate tax, estate planning remains a smart financial strategy. Planning helps ensure that assets are distributed according to the decedent’s wishes, minimizes stress on families during probate, addresses income tax considerations, and can help maximize how much wealth is passed to heirs.
Common estate planning tools include wills, trusts, beneficiary designations on retirement accounts and insurance policies, powers of attorney, and advance directives. These tools help coordinate how assets are transferred and can reduce federal tax exposure and probate delays.
Good planning also considers multi-state properties or assets located outside Texas, which may be subject to other state tax laws.
Common Misconceptions About Inheritance Tax in Texas
Many people mistakenly believe that they will owe a tax just for inheriting assets in Texas. Because the state has no inheritance tax, heirs can receive transfers tax-free at the state level. However, misunderstanding often arises around federal estate tax and taxable income from inherited assets.
Another common misconception is that federal estate tax applies to all estates; in reality, only estates exceeding the federal exemption amount are subject to federal tax. Most estates fall below that threshold.
Understanding the distinction between inheritance tax, estate tax, income tax, and capital gains tax helps heirs make informed decisions and reduces surprise tax bills.
Recent Legal Changes Protecting Heirs in Texas
In November 2025, Texas voters approved a constitutional amendment that permanently prohibits the state legislature from enacting any new estate, inheritance, or death transfer tax. This amendment ensures that heirs will not face a Texas-level inheritance or estate tax now or in the future and solidifies Texas’s position as a tax-friendly state for estate planning.
This constitutional protection gives residents confidence that no state tax will reduce the value of inherited assets in the decades ahead.
Practical Steps for Texans Expecting an Inheritance
If you are expecting an inheritance in Texas, start by understanding the types of taxes that may apply: federal estate tax if the estate is large, federal income tax on distributions from retirement accounts, and federal capital gains tax on sold assets. Plan ahead for ongoing property taxes on inherited real estate.
Consult a qualified tax advisor or estate attorney familiar with Texas and federal tax laws to tailor strategies to your specific situation. This will help ensure your inheritance is managed wisely and tax obligations are minimized.
Have you had questions or experiences with inheritance or estate planning in Texas? Share what matters most to you in the comments and stay involved in the conversation.