As we have previously written, each year changes occur in the Federal Estate Tax Exemption and Gift Tax Exemption amounts. Effective January 1, 2026, the federal estate tax exemption is $15 million per individual. For married couples, the combined exemption amount is $30 million. These amounts represent an increase from the 2025 exemption of $13.99 million per individual and $27.98 million per couple. This higher exemption level was made permanent and indexed for inflation starting in 2027 by recent legislation.
What this means: If the total value of your assets, including real estate, investments, cash and personal property, when you die is less than this amount, your estate will not owe any federal estate tax. The tax, which can be as high as 40%, is only applied to the value of the estate that exceeds the exemption amount.
New Jersey: New Jersey repealed its estate tax as of January 1, 2018. An inheritance tax is still in effect in New Jersey. This tax is levied on the beneficiary based on their relationship to the deceased person.
- Transfers to a surviving spouse, domestic partner, civil union partner, children, stepchildren, grandchildren, parents, and grandparents are exempt from inheritance tax.
- Transfers to a sibling or a deceased child’s spouse are exempt for the first $25,000, then at rates from 11%-16% on amounts above the exemption.
- Friends, distant relatives, nieces, nephews are taxed at 15%-16%.
- Qualified charities are fully exempt.
Pennsylvania: Like NJ, Pennsylvania does not have a state estate tax. An inheritance tax is in effect in Pennsylvania. Here are the tax rates:
- Transfers to a surviving spouse are fully exempt from inheritance tax.
- Transfers to a child aged 21 or younger are also fully exempt.
- Transfers to adult children and other direct descendants face a 4.5% tax rate.
- Transfers to siblings are taxed at a rate of 12%.
- Transfers to all other heirs pay a 15% tax.
- Transfers to qualified charitable organizations are tax-exempt.
Inheritance Taxes are paid to the state by filing an inheritance tax return. Maselli, Mills & Fornal’s Estates Department file inheritance tax returns for our estate administration clients and assist with all aspects of probating a decedent’s estate.