How Much Money Can You Inherit Without Paying Taxes on It

How much money can you inherit without paying taxes on it is a crucial question for many families planning their estates in 2025. As of this year, the latest news offers some much-needed clarity thanks to new laws preventing a long-feared reduction in tax-free inheritance limits. Recent federal action ensures that individuals and families can continue to transfer substantial wealth without triggering federal estate taxes, making 2025 a pivotal year for estate planning.

Key Points Summary

• The federal estate tax exemption for 2025 is $13.99 million per individual and $27.98 million per married couple.
• The annual gift tax exclusion is $19,000 per recipient ($38,000 for couples) in 2025.
• A new law has permanently increased future exemption limits to $15 million per person and $30 million per couple, adjusted for inflation.
• Exceeding federal exemption triggers a maximum 40% estate tax on the surplus.
• State inheritance and estate tax rules may differ and could apply much lower thresholds.

2025 Federal Inheritance Tax Landscape

Federal law remains the primary consideration for most Americans. In 2025, an individual can inherit up to $13.99 million without owing federal estate tax. For married couples, this figure doubles to $27.98 million. These numbers represent increases from 2024 and result from automatic adjustments tied to inflation as outlined by the IRS.

In addition, you can receive gifts tax-free up to $19,000 per year from any one person ($38,000 for a couple giving jointly) before the giver must file a gift tax return. Notably, most people will never need to concern themselves with federal estate taxes, as only about 0.2% of estates surpass these high thresholds.

*Indicates a new permanent baseline due to recent legislation, subject to inflation increases in coming years.

What Changed in 2025?

Previously, the large exemption amounts for estate and gift taxes were set to “sunset” at the end of 2025, meaning they would automatically drop back to about $7 million per person and roughly $14 million for married couples. This rollback would have significantly reduced the amount families could pass on to heirs without triggering federal estate taxes, creating uncertainty for high-net-worth households and their advisors.

However, the passage of the “One Big Beautiful Bill Act,” signed into law in July 2025, changed the landscape dramatically. Instead of allowing the exemption to shrink, the new law made the higher limits permanent, ensuring long-term stability for estate planning. Beginning in 2026, the exemption rises to $15 million per individual and $30 million per married couple, a substantial increase that offers greater flexibility for wealth transfer strategies.

In addition, these exemption amounts will now be adjusted annually for inflation, starting in 2027, which prevents future erosion of the benefit. This adjustment means that as the cost of living increases, so too will the amount families can shield from estate taxes, further strengthening the protection of generational wealth.

For families and estate planners, this shift removes the “use-it-or-lose-it” pressure that had been hanging over 2025. Instead of rushing to finalize trusts, gifts, and other strategies before the sunset date, they can now plan with confidence and clarity, knowing that the elevated exemption is not only here to stay but will also grow over time. This certainty allows for more thoughtful, long-term planning that aligns with family goals, charitable giving, and wealth preservation.

Read Also- What Changed in 2025? Estate and Gift Tax Exemptions Explained

State Tax Considerations

Not all inheritance taxation happens at the federal level. Several states levy their own estate or inheritance taxes, often with much lower exemptions than the federal government.

• Washington State: Currently has one of the strictest thresholds, with a $2.193 million exemption per person in 2025. Estates valued above that may be subject to tax at progressive rates.
• Minnesota: Offers a $3 million estate tax exemption, but amounts above that level are taxed depending on the estate’s size.
• Maryland: Stands out because it imposes both an estate tax and a separate inheritance tax, making it one of the few states to have both systems in place.
• New Jersey: Although it repealed its estate tax in 2018, it still maintains an inheritance tax, which applies to certain heirs depending on their relationship to the deceased.
• Nebraska: Also enforces an inheritance tax, with rates and exemptions varying by county and the beneficiary’s relationship to the decedent.

This means you could owe state-level taxes even if you fall below the federal threshold. Because each state sets its own rules, exemptions, and rates, it’s important to review local laws or consult a tax professional to fully understand potential liabilities.

Taxable Inheritances: What’s Included?

When calculating whether an inheritance is subject to federal estate tax, the IRS looks at the total value of the estate, not just the cash that passes to heirs. This includes a wide range of assets such as cash savings, real estate holdings, stocks, bonds, business interests, valuable personal property like art or jewelry, and even certain insurance proceeds. Essentially, if it has financial value, it is counted toward the estate’s taxable worth.

Only the portion of the estate’s value that exceeds the federal exemption limit is subject to tax, and that amount can be taxed at rates of up to 40%. For example, with the 2026 exemption set at $15 million per individual, an estate worth $18 million would only face tax on $3 million, not the full value.

It’s also important to understand which specific assets are commonly included in these calculations. Inherited retirement accounts such as IRAs or 401(k)s are part of the taxable estate, though the heirs may also face separate income tax when withdrawing funds. Life insurance proceeds are generally excluded if they go directly to a named beneficiary, but if the estate itself is the beneficiary, those proceeds are added to the taxable estate. Similarly, appreciated assets like stocks, bonds, or real estate are included at their fair market value on the date of death.

In practice, this means that while many families never owe estate tax due to the high exemption amounts, wealthier households with diversified assets need to account for how each type of property is treated. Proper planning can help minimize exposure, ensure heirs receive the intended value, and avoid surprises when the estate is settled.

Smart Moves for 2025 Heirs

The updated 2025 rules present heirs and families with valuable estate planning opportunities. By acting strategically, you can reduce potential tax liabilities and preserve more wealth for future generations:

• Annual Gift Tax Exclusion: You can gift up to $19,000 per recipient, per year, completely tax-free. For married couples, this amount doubles to $38,000 per recipient. This strategy is a simple way to gradually transfer wealth to children, grandchildren, or even friends without reducing your lifetime exemption.
• Maximize the Unified Exemption: The federal unified estate and gift tax exemption remains at historically high levels—$13.61 million per individual in 2024, with inflation adjustments expected for 2025. Making lifetime gifts or bequests under this exemption is especially powerful because the IRS has confirmed that gifts made now will not be “clawed back” if the exemption amount drops in the future (which is scheduled to happen in 2026 unless Congress extends it).
• Leverage Trusts and Estate Planning Tools: Setting up irrevocable trusts, generation-skipping trusts, or charitable remainder trusts can help manage large estates more effectively. These structures not only provide tax advantages but also give you greater control over how and when heirs receive assets, helping shield wealth from creditors, divorce settlements, or poor financial management.
• Family Limited Partnerships (FLPs) and LLCs: Families with significant business or real estate holdings may benefit from creating FLPs or LLCs. These structures allow for gradual transfer of ownership interests at discounted values, while maintaining centralized management and protecting family assets.
• Charitable Giving Strategies: Donations to qualified charities—whether made outright, through donor-advised funds, or via charitable trusts—can reduce the taxable value of your estate while also supporting meaningful causes.
• Regularly Review and Update Estate Plans: Tax laws are subject to change, and the current high exemption is set to expire after 2025. Heirs and benefactors should review estate plans regularly to ensure strategies align with current rules and anticipated future changes.

By combining annual gifts, the generous unified exemption, and advanced planning structures, heirs and families can significantly reduce potential estate tax exposure while creating a smoother transfer of wealth.

Final Thoughts

While the vast majority of heirs will not owe federal tax on their inheritance in 2025, nuances in state law and asset types demand attention. Planning ahead can help you and your family maximize what you keep and minimize surprises. Have further questions or want to share your thoughts? Leave a comment below—your experiences matter!