Texas Inheritance Tax Calculator (2026)

Drop in the gross estate value and marital status. Most Texas estates are well below the federal exemption — the answer is usually $0. For estates above the threshold, the marginal federal rate is 40%.

Texas has neither a state estate tax (paid by the deceased's estate before distribution) nor a state inheritance tax (paid by the beneficiary after receipt). Texas joined the majority of states in eliminating these taxes — the state estate tax (a "pickup tax" tied to a federal credit) effectively ended in 2005 when Congress repealed the federal credit.

Only six US states currently have an inheritance tax (paid by beneficiaries): Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and (until recently) Iowa. Twelve states plus DC have a state estate tax. Texas has neither.

What Texas heirs may still pay:

• Federal estate tax — only on estates above the federal exemption (about $14 million per person for 2026)
• Federal income tax on inherited retirement accounts — IRAs and 401(k)s carry income in respect of decedent (IRD); withdrawals are taxed as ordinary income to the heir
• Federal capital gains tax on inherited assets later sold — only on appreciation after the death date (because of the §1014 step-up in basis)
• Property tax on inherited real estate — Texas property tax applies based on the property's value, but the heir may qualify for homestead transfer rules

For most Texas inheritances under $14 million, the federal estate tax simply does not apply. The combination of no Texas state tax plus the high federal exemption means most Texas heirs receive distributions tax-free at the federal level (with the major exception of inherited IRAs).

The federal estate tax applies only to estates valued above the federal exemption:

• 2025 exemption: $13.99 million per individual
• 2026 exemption (projected): ~$14.3 million per individual
• Married couple combined: Up to ~$28.6 million with proper portability election
• Rate above exemption: Graduated, topping out at 40%
• Sunset risk: Without legislation, the exemption is scheduled to revert to about $7 million per person on January 1, 2026, halving the threshold. Congress is debating extension as of mid-2026.

Practical implication for Texas estates: if the deceased's gross estate (real estate, retirement accounts, investments, business interests, life insurance) totaled less than the exemption, no federal estate tax is owed. The estate may still need to file an estate tax return (Form 706) for portability election even if no tax is owed.

For estates above the exemption (rare but not unheard of in Texas given oil/gas, real estate, and business wealth), the marginal 40% rate is substantial. Estate planning techniques — irrevocable trusts, GRATs, family limited partnerships, charitable trusts — can reduce or defer the tax. Texas residents with high-net-worth estates should consult a Texas-based estate attorney specifically experienced with the projected 2026 sunset reversion.

One of the most valuable federal tax features for inherited assets: the step-up in basis. When a person dies, the cost basis of their assets is "stepped up" to fair market value on the date of death (or, alternatively, six months later if elected).

Worked example: a Texas resident bought stock for $50,000 in 1995. By death in 2026, the stock is worth $500,000. The cost basis steps up to $500,000. If the heir sells the next day for $500,000, they have zero capital gain and owe no federal capital gains tax. The $450,000 unrealized gain disappears forever.

Property gets the step-up too. A Texas couple bought a Houston home for $80,000 in 1985. At the time of inheriting it from the surviving spouse in 2026, the home is worth $625,000. New basis: $625,000. If the heirs sell immediately, no taxable gain. If they hold it 5 years and sell for $750,000, taxable gain is only $125,000.

The step-up does NOT apply to retirement accounts (IRAs, 401(k)s) because those carry "income in respect of decedent" — they retain the original character and are taxed as ordinary income to the beneficiary when withdrawn. This is the biggest exception and the largest tax exposure for Texas heirs receiving qualified retirement accounts.

The SECURE Act (2019) and SECURE 2.0 (2022) reshaped how inherited retirement accounts work:

• 10-year rule: Most non-spouse beneficiaries must fully empty an inherited IRA within 10 years of the original owner's death. No annual minimum required during the 10 years, but the balance must be zero by year 10.
• Annual RMDs during the 10 years: If the original owner had started required minimum distributions, the beneficiary must continue annual RMDs and empty by year 10.
• Spouse exceptions: Surviving spouses can roll the inherited IRA into their own IRA and avoid the 10-year rule entirely.
• "Eligible designated beneficiaries": Disabled or chronically ill beneficiaries, minor children of the decedent, or beneficiaries less than 10 years younger can stretch withdrawals over their life expectancy.
• Taxes: All withdrawals from inherited traditional IRA are ordinary income to the beneficiary. Withdrawals from inherited Roth IRA are tax-free.

Practical implication for Texas heirs: if you inherit a large traditional IRA, you're facing a 10-year window to take all the money out, with each withdrawal taxed as ordinary income at your marginal federal rate. A $500,000 inherited traditional IRA forces $50,000+/year in additional taxable income for 10 years. If you're working and already in a high bracket, this can push you into the 32% or 35% bracket on the inherited money.

Strategy: most Texas heirs should consult a CPA or financial planner immediately upon inheriting a large IRA. Options include front-loading withdrawals in low-income years, using qualified charitable distributions if 70½+, or converting to Roth before withdrawal (this only applies during the decedent's life, not after — but a Texas heir who already has their own traditional IRA can consider their own Roth conversions to offset future tax brackets).

Scenario 1 — $500,000 inherited Houston home, sold immediately: Step-up basis to $500,000. Sale at $500,000 = $0 gain. Federal capital gains tax: $0. Texas state tax: $0. Total tax on the inheritance: $0. The heir nets the full $500,000 minus closing costs.

Scenario 2 — $1.2M inherited traditional IRA, 10-year withdrawal: Heir is in 24% federal bracket. $1.2M ÷ 10 years = $120,000/year additional taxable income. Federal income tax over 10 years: ~$300,000 (assuming bracket stays at 24%; likely higher at the margin). Texas state tax: $0. Total federal tax on the inheritance: $300,000. Net to the heir: $900,000 of the original $1.2M.

Scenario 3 — $400,000 inherited Roth IRA, 10-year withdrawal: Withdrawals are entirely tax-free if the Roth was open at least 5 years. Federal income tax: $0. Texas state tax: $0. The heir receives the full $400,000. This is one reason Roth conversions during one's life can dramatically improve outcomes for heirs.

Scenario 4 — $8M total estate, mix of real estate, IRA, stocks: Below federal exemption ($14M+), so no federal estate tax. No Texas estate tax. Step-up applies to real estate and stocks; inherited IRA carries IRD. If heirs hold real estate and stocks, no immediate tax; if they sell, only post-death appreciation is taxable. Total inheritance can pass with minimal federal tax exposure, primarily on the IRA portion as withdrawn over 10 years.