Does Texas Have an Estate Tax or Inheritance Tax?
While Texas levies no estate or inheritance tax, an estate may still be subject to federal tax or other state-specific financial obligations.
Texas does not impose a state-level estate tax on its residents. An estate tax is a levy on the total value of a deceased individual’s assets, including cash, real estate, and investments, before any of that wealth is transferred to heirs. This policy has been in place since 2005, following federal law changes that eliminated a credit for state death taxes.
The Federal Estate Tax
Even without a state-level tax, estates in Texas may be subject to the federal estate tax. This tax is only levied on estates with a value exceeding a substantial exemption amount, which is indexed for inflation annually. For 2025, this exemption is set at $13.99 million per individual.
If an estate’s value surpasses the exemption threshold, the estate itself is responsible for paying the tax, not the individuals receiving the inheritance. The tax is calculated on the value of the estate that exceeds the exemption amount, with a top tax rate of 40%. The executor of the estate must file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, if the gross estate’s value exceeds the filing threshold for that year.
Texas Inheritance Tax
In addition to having no estate tax, Texas also does not have an inheritance tax. These two taxes are often confused, but they function differently. An inheritance tax is not paid by the deceased’s estate; instead, it is levied directly on the beneficiaries or heirs who receive assets from the estate. The responsibility for payment falls on the person inheriting the property.
While a handful of other states do impose this type of tax, Texas residents who inherit property from a Texas decedent do not face a state inheritance tax liability.
Other Tax Considerations for Texas Estates
While Texans are free from state estate and inheritance taxes, other tax matters can arise during the administration of an estate. If a Texas resident dies owning real estate or other tangible property located in a state that does have its own estate tax, that state may impose its tax on the value of that specific property.
Furthermore, the conclusion of a person’s financial affairs involves addressing final income taxes. The executor must file a final Form 1040, U.S. Individual Income Tax Return, for the decedent, reporting all income earned up to the date of death. If the estate itself generates income after the individual’s death, such as from investments or rental property, it may be required to file a separate income tax return, Form 1041, U.S. Income Tax Return for Estates and Trusts. This is necessary if the estate has gross income of $600 or more during its tax year.