How Much is Inheritance Tax in Texas? Complete Guide

Mar 2, 2022estate tax, Texas inheritance tax

Leslie Thomas, Attorney

If you are estate planning or thinking about starting to plan for your estate, you might be wondering how much inheritance tax is in Texas. 

Inheritance tax is imposed on the heirs of an estate when they inherit property. Luckily, Texas residents don’t need to worry about inheritance tax at all on the state level, and only after they pass a certain threshold on the federal level.  

This guide will provide you with all the information you need to know about inheritance tax in Texas, including how it works. Let’s take a closer look at what this means for beneficiaries in Texas.

Inheritance Tax Laws in Texas

Inheritance tax, also called the estate tax or death tax, is levied at both the federal level and state level and applies to any assets transferred to someone other than the deceased’s spouse at the time of death. 

In some states, individual inheritors are charged a state inheritance tax on top of federal inheritance taxes. But Texas does not have a state tax for inheritance. 

Do Texas Residents Pay State Estate Tax?

There are many benefits to living and owning property in the state of Texas, and this includes no inheritance tax rate.

The purpose of inheritance tax is to collect revenue from estates to fund state programs and services. However, there is no such tax in Texas, and beneficiaries can receive their inheritance without paying any taxes.

Being a beneficiary of an estate means carrying the responsibility of paying inheritance tax in certain states, but Texas repealed state inheritance tax in 2015.  

Because the state is free of inheritance tax, heirs to an inheritance won’t be taxed on it. When someone dies, their estate goes through a legal process known as probate. This process determines who inherits the deceased person’s assets. The assets are passed on to the heirs according to the will or determinations of the probate court (in the cases without a will). 

See this related post on the differences between inheritance and estate tax.

How Much is Inheritance Tax in Texas?

Texas has no inheritance tax, so any money you receive as a beneficiary is not charged state tax, income tax, property tax, or capital gains tax. This is because the amount is taxed on the individual’s final tax return.

Even though no state inheritance taxes are imposed, some estates are subject to federal estate taxes. These are based on the net value of a person’s assets at the time of their death and the estate itself pays these federal estate taxes. 

As of 2022, if an individual leaves less than $12.06 million to their heirs, they won’t have to worry about paying any federal estate tax in the US. Married couples can shield up to $24.12 million together, tax-free. Anything over these amounts will be taxed at a rate of 40%.

Do You Have To Pay Property Tax On The Sale Of My Deceased Parents’ Home In Texas?

Once again, Texas has no inheritance tax. This means that the Texas Constitution also limits the Texas Legislature from imposing an inheritance or estate tax on real and personal property. 

So inheritors should not expect to pay any property tax on real estate acquired from a deceased parent as it is real property. However, there is no such limit on the power of the Legislature to impose an inheritance or estate tax on intangible property. 

When Texas Inheritance Laws Might Apply

Even though Texas does not have an estate or inheritance tax, there are instances when such taxes are applied to inheritances in Texas. For example, there may be cases when a property is located in a state where estate and inheritance taxes exist, and taxes will be levied as a result. 

If you own a lot of property in a state with the estate tax, such as Kentucky, the beneficiaries of your will could be subject to both Kentucky state tax and federal tax. This could include a capital gains tax on the selling of a property or asset. 

Moreover, different inheritance laws, like a federal inheritance tax, might apply to individuals without a will. If you die without a will or other estate documents it’s called dying intestate, and you lose the ability to guide your financial legacy and execute an estate plan. Dying intestate means that Texas’s intestate succession process will determine the distribution of your assets.

Trusts and Wills in Texas

An experienced estate planning lawyer can help you plan for the future without adding any more hassle or expenses to what should be a relatively straightforward process. That way, all of your work becomes a legacy, and you can enjoy spending time with your family and loved ones. 

With an estate planning attorney, you may:

  • Designate heirs 
  • Appoint a trustee, executor, or personal representative of your estate
  • Help you budget if your assets are eligible for the federal tax rate
  • Set up trusts
  • Ensure your final income tax is completed after death
  • Support your surviving spouse or children after death

Estate plans are essential for ensuring the safety of a person’s assets. When it comes to structuring a will in Texas, you need to have everything legally covered, so your will and estate are clear and concise for your beneficiaries. 

Naturally, navigating estate tax in Texas can be difficult. Our Fort Worth attorneys specialize in handling estate law cases, including inheritance, and helping you navigate the different types of trusts available to you. We can advise on the best steps moving forward for managing all estate planning matters, securing a power of attorney, ladybird deed, Medicaid asset protection, writing up a will in Texas, and much more.

Getting Your Will in Order

Since there is no state inheritance tax in Texas and beneficiaries can receive their inheritance without this extra burden of taxation, you may think that you do not need a will–think again!

All wills go through probate. However, if you die without a will in Texas your estate goes through probate without your assets having clear intentions with regard to your wishes. This often results in a lengthy process that could be avoided. The Texas Probate Code then decides who inherits your property, and a tax may be levied against your estate.

For these reasons and many more, it’s important to start estate planning early. 

Before you begin planning your estate, ask yourself this—am I committed to my financial legacy? Writing your will earlier rather than later is the key to a tidy estate and will improve your loved ones well being even after you pass away. You should also avoid cookie-cutter online DIY will documents that are spell more trouble than help. 

To have peace of mind, set up a complimentary consultation with Leslie Thomas of Thomas-Walters, PLLC. She can provide you with guidance on the Texas estate tax, inheritance laws, and the best plan for your situation. 

If you would like more information about estate planning and how to minimize taxes, don’t hesitate to get in touch with our office for a consultation. We would be happy to answer any questions you may have.


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