Does Utah Have an Inheritance or Estate Tax?

The rules surrounding inheritance and taxes vary significantly across the country, adding a layer of uncertainty during an already difficult time. Many individuals who receive assets from a deceased person are unsure about their potential tax obligations. This article provides clarity on the tax requirements for receiving an inheritance from a resident of Utah, explaining the applicable state and federal rules.

Utah’s Position on Inheritance and Estate Taxes

Utah does not impose an inheritance tax, so beneficiaries can receive their inheritance without a state tax liability, regardless of their relationship to the deceased or the size of the inheritance. An inheritance tax is a tax paid directly by the beneficiary on the money or property they receive, and the amount is typically calculated as a percentage of the value of the assets.

In addition to having no inheritance tax, Utah also does not have a state-level estate tax. An estate tax is levied on the total value of a deceased person’s estate before the assets are distributed to the heirs. The responsibility for paying this tax falls on the estate itself, not the individual beneficiaries. Utah’s estate tax was previously tied to a federal tax credit for state death taxes; however, this credit was eliminated by federal law changes after December 31, 2004, which consequently ended Utah’s basis for collecting its own estate tax.

The Federal Estate Tax Requirement

While Utah does not have its own estate tax, a federal estate tax still exists, which is applied independently of any state laws. The federal government sets a high threshold, known as an exemption, that an estate’s value must exceed before this tax applies.

For estates of individuals who pass away in 2025, the federal estate tax exemption is $13.99 million. Because of this substantial exemption, the vast majority of estates fall well below the filing threshold and are not subject to the federal estate tax. For estates that do exceed the exemption, a tax return, IRS Form 706, must be filed within nine months of the individual’s death, and the tax is calculated only on the value that surpasses the exemption amount.

Other Tax Implications for Heirs

An heir’s tax obligations are not solely determined by the deceased’s state; the heir’s own state of residence is also an important consideration. If a beneficiary lives in one of the few states that impose an inheritance tax, they may be required to pay tax to their home state on the assets received from a Utah estate. As of 2025, the states that collect an inheritance tax are:

• Nebraska
• Kentucky
• Pennsylvania
• Maryland
• New Jersey

A separate and often beneficial tax rule for heirs involves the “step-up in basis” for inherited assets like stocks or real estate. Under this provision, the cost basis of an asset is adjusted to its fair market value at the date of the original owner’s death. This is a significant advantage because capital gains tax, which is owed when an asset is sold, is calculated on the difference between the sales price and the cost basis.

For example, if a person inherits a property that was originally purchased for $100,000 but is valued at $500,000 at the time of the owner’s death, the heir’s cost basis becomes $500,000. If the heir later sells that property for $550,000, they would only owe capital gains tax on the $50,000 of appreciation that occurred after they inherited it. Without the step-up, the taxable gain would have been $450,000, resulting in a much higher tax liability. This rule effectively erases the capital gains that accrued during the deceased owner’s lifetime.