After a loved one passes, sorting out what happens next can feel overwhelming, especially when it comes to any outstanding financial burden. People often wonder whether receiving money or property from an estate means they’ll owe taxes on it. The good news is that Texas doesn’t collect an inheritance tax. But, depending on where your loved one lived or what you’re inheriting, some tax responsibilities could still come into play for the estate.
At Homestead Legal, we help families in Round Rock and throughout Texas understand the probate process, structure estate plans to reduce future tax and financial concerns, and make sure those obligations are handled properly. Let’s walk through what you need to know.
What is an Inheritance Tax?
An inheritance tax is a type of state-level tax that can be applied when someone receives money, property, or other assets after a person dies. Whether the tax applies depends on where the deceased person lived and the beneficiary’s relationship to them.
Only a few states still collect inheritance taxes, and each one handles it differently. Close family members, such as spouses and children, often pay little or nothing, while more distant relatives or unrelated individuals may face higher rates. If your loved one lived in Texas, this likely won’t apply, but if they lived elsewhere, it’s worth checking.
Is an Inheritance Tax Different From an Estate Tax?
Yes. Inheritance tax is charged to the person receiving the assets. Estate tax, on the other hand, is paid by the estate itself before any distributions are made. Most people never have to worry about the estate tax, since the federal version only applies to estates worth more than $13.61 million (for FY 2025).
What States Have Inheritance Taxes?
As of now, only the following six states still impose inheritance taxes:
- Iowa
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
The tax rate depends on how much you inherit and how closely you were related to the person who passed. Some states tax as little as 1% for certain heirs, while others charge over 15% in certain cases. If your loved one owned property or lived in one of these states, those rules might apply even if you live in Texas now. Some people have opted to refuse an inheritance due to the financial burden that sometimes accompanies it.
Do I Have to File Taxes for the Decedent of the Estate?
Yes—several tax filings may still be required even if there’s no inheritance tax. The person handling the estate (often called the executor or administrator) usually needs to make sure these are taken care of:
- A final personal income tax return for the deceased
- An estate income tax return, if the estate earns income during the probate process
- A federal estate tax return, if required due to the estate’s size
These forms need to be filed on specific timelines and can affect how quickly the estate is settled. While Homestead Legal does not prepare tax returns, we do help our clients understand what needs to be done and connect them with tax professionals if needed. Our role is to make sure the probate process moves forward smoothly and legally.
Texas Estate Planning and Probate Services That Keep Money in the Family
At Homestead Legal, we help Texas families make smart choices that reduce unnecessary tax burdens and keep more wealth where it belongs. Our estate plans are crafted to preserve what you’ve built. We also guide families through probate with practical support and clear explanations at every step. Contact us for help protecting your loved ones and honoring your legacy without taking away from it through taxes.
