The state of Texas does not have an estate tax, however residents may still be subject to federal estate tax laws. If you live in Texas and are thinking about estate planning, this guide will walk you through what you need to know. If you think you need help with estate planning or general financial planning, you may want to consider getting a financial advisor. SmartAsset’s free matching tool can pair you with up to three financial advisors who serve your area.
Texas Estate Tax
Texas does not levy an estate tax. It is one of 38 states with no estate tax.
What Is the Estate Tax?
The estate tax, sometimes referred to as the “death tax,” is a tax levied on the estate of a recently deceased person before the money passes on to their heirs. It only applies to estates that reach a certain threshold.
The estate tax is different from the inheritance tax, which is taken by the government after money or possessions have been passed on to the deceased person’s heirs.
There is also no inheritance tax in Texas. However other states’ inheritance taxes may apply to you if a loved one who lives in those states gives you money, so make sure to check that state’s laws. For example, in Pennsylvania, there is a tax that applies to out-of-state inheritors. If you have a loved one who dies in Pennsylvania and leaves you money, you may owe taxes to that state.
Texas also has no gift tax, meaning the only gift tax you have to worry about is the federal gift tax. The gift tax exemption for 2024 is $18,000 per recipient, which is an increase over the $17,000 mark set for 2023. Gifting more than that to any individual person in a single year means that the amount over the limit counts against your 2024 lifetime exemption of $13.61 million.
Federal Estate Tax
Regardless of the size of your estate, you won’t owe estate taxes to the state of Texas. You might owe money to the federal government, though. The federal estate tax only kicks in at $13.61 million for deaths in 2024 and $12.92 million in 2023. In other words, if an estate surpasses that number, any value above that mark is subject to the estate tax. Estates worth less than that pay nothing to the federal government.
This tax is portable for married couples. This means that if the right legal steps are taken, a married couple’s estate won’t have to pay a tax on up to $27.22 million when both spouses die. If an estate exceeds that amount, the top federal tax rate is 40%.
Here’s an example of how to calculate the federal estate tax:
Let’s say your estate is worth $16.22 million and you don’t have a spouse. Subtracting the 2024 exemption of $13.61 million, you have a taxable estate of $2.61 million. Consulting the chart below, you’re in the highest bracket. Your base payment on the first $1 million is $345,800. You also pay 40% on the remaining $2.3 million, which comes to $644,000. That, plus the base of $345,800, means your total tax burden is $989,800.
Federal Estate Tax Rates
Taxable Estate*
Base Taxes Paid
Marginal Rate
Rate Threshold**
$1 – $10,000
$0
18%
$1
$10,001 – $20,000
$1,800
20%
$10,001
$20,001 – $40,000
$3,800
22%
$20,001
$40,001 – $60,000
$8,200
24%
$40,001
$60,001 – $80,000
$13,000
26%
$60,001
$80,001 – $100,000
$18,200
28%
$80,001
$100,001 – $150,000
$23,800
30%
$100,001
$150,001 – $250,000
$38,800
32%
$150,001
$250,001 – $500,000
$70,800
34%
$250,001
$500,001 – $750,000
$155,800
37%
$500,001
$750,001 – $1,000,000
$248,300
39%
$750,001
Over $1,000,000
$345,800
40%
$1,000,001
*The taxable estate is the total above the federal exemption of $13.61 million. **The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Texas Tax Picture
Texas is a very tax-friendly state, especially for retirees. There’s no state income tax in Texas, so there won’t be taxes on Social Security and other retirement income. Keep in mind that you’ll still be paying federal income tax. However, not owing any money to the state can be a relief, especially for those on a specific income in retirement.
Property tax, though, is a different story. The state has some of the highest property taxes in the country. The property tax in Texas averages an effective rate of 1.73%, which is one of the nation’s highest marks. Finally, the state sales tax base is 6.25%, but with local taxes can get as high as 8.25%.
If you’re planning an estate or just looking to get help with financial planning in general, a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Planning an estate is not just for the old. In fact, you should start thinking about your estate plan when you’re younger, so that you will be prepared as you move into your later years.
Texas also doesn't have a state-wide estate tax. That'll make many native Texans breathe a sigh of relief. But even though there's no estate tax in Texas, you or a family member still might have federal estate tax liability.
There is no inheritance tax in Texas. However, if you are inheriting property from a person who lived in another state, you might have to pay a local inheritance tax. Further, estates must pay the federal estate tax when applicable.
In the state of Texas, there is no inheritance tax but your estate may still be subject to federal estate taxes. Luckily, there are several ways to reduce or even eliminate your tax liability such as making gifts, setting up trusts, paying into life insurance, and investing in tax-advantaged accounts.
There is also no inheritance tax in Texas. However other states' inheritance taxes may apply to you if a loved one who lives in those states gives you money, so make sure to check that state's laws.
Living in the inherited property for at least two years before selling it may allow you to avoid capital gains tax on up to $250,000 (or $500,000 if filing jointly) of profit.
There is no inheritance tax in Texas. You may have to pay federal estate taxes, but not state inheritance taxes. Texas is one of a handful of states that does not have an inheritance tax.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
An estate tax is levied on the estate of the deceased while an inheritance tax is levied on the heirs of the deceased. Only 17 states and the District of Columbia currently levy an estate or inheritance tax.
Under the new Texas inheritance laws, if a married person with no children passes away without a will, their entire estate goes to their spouse. This means that even if you have siblings, parents, or other family members, they won't receive any of your assets if you pass away before your spouse.
Certain types of trusts can help avoid estate taxes. An irrevocable trust transfers asset ownership from the original owner to the trust beneficiaries. Because those assets don't legally belong to the person who set up the trust, they aren't subject to estate or inheritance taxes when that person passes away.
The deceased person's spouse and children are typically first in line to inherit the home.These relatives automatically become the new owners upon the homeowners' death. If you have inherited your home via intestacy, it's best to file an affidavit of heirship in the county deed records where the property is located.
There is a federal estate tax, however, which is paid by the estate of the deceased. In 2024, the first $13,610,000 of an estate is exempt from the estate tax. A beneficiary may also have to pay capital gains taxes if they sell assets they've inherited, including stocks, real estate or valuables.
Do all heirs have to agree to sell property in Texas? Yes, but it is helpful to have mostly of your heirs on your side, at the very least. If you're looking to sell your house but have yet to have a complete consensus and a will, you may start a lawsuit in the probate court.
If she “sells” it to you for $1.00, it is possible that the IRS will consider it a “gift” and charge her gift tax on the value of the house. Even if she does not get hit with that, you will be hit with a massive Capital Gains Tax hit when you sell, since your basis will be $1. Better is to inherit it.
Taxpayers who don't qualify to exclude all of the taxable gain from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return.
In 2024, the first $13,610,000 of an estate is exempt from taxes, up from $12,920,000 in 2023. Estate taxes are based on the size of the estate. It's a progressive tax, just like our federal income tax. That means that the larger the estate, the higher the tax rate it is subject to.
Inheritance Laws in Texas. Texas does not impose a state inheritance or estate tax. Most of its laws surrounding inheritance are straightforward. However, if you die without a will, the distribution of your assets will be left up to the state's intestate succession process.
How Much Does an Estate Have to Be Worth to Go to Probate in Texas? In Texas, an estate exceeding a value of $75,000 necessitates a full probate administration.
Introduction: My name is Jonah Leffler, I am a determined, faithful, outstanding, inexpensive, cheerful, determined, smiling person who loves writing and wants to share my knowledge and understanding with you.
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