Massachusetts does not have an inheritance tax. If someone leaves you money, a house, or any other property, you don’t owe the state anything for receiving it. What Massachusetts does have is an estate tax, which is a different animal: it’s paid by the deceased person’s estate before assets are distributed, and only when the estate is worth more than $2 million.1Mass.gov. Massachusetts Estate Tax Guide So as a beneficiary, you don’t write a check to Massachusetts simply for inheriting.
Inheritance Tax vs. Estate Tax
The two taxes get mixed up constantly, and the difference matters. An estate tax is paid by the estate itself, out of estate funds, before anything reaches the heirs. An inheritance tax is paid by each beneficiary based on what they personally receive, and the rate often depends on how closely they were related to the deceased.
Massachusetts has never imposed an inheritance tax. Only a handful of states do. If you inherit from someone who lived in Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, you may owe an inheritance tax to that state even though Massachusetts wouldn’t tax you. Iowa had one but eliminated it in 2025. Where the deceased lived, not where you live, is what usually determines whether an inheritance tax applies.
The Massachusetts Estate Tax
Because the estate tax comes out of the estate, it can indirectly shrink what you receive. It’s worth knowing how it works even if you’re not the executor.
The tax kicks in when the gross estate plus adjusted taxable gifts exceeds $2 million.2Mass.gov. Massachusetts General Laws c.65C Section 2A A credit of $99,600 zeroes out the tax on the first $2 million, and only value above that threshold produces an actual bill. Marginal rates start at 0.8% and climb to 16% at the top of the scale, reaching that top rate on estate values above roughly $10 million.1Mass.gov. Massachusetts Estate Tax Guide
The gross estate is broader than most people expect. It includes real estate, bank accounts, investments, retirement accounts, personal property, and life insurance proceeds, even when those proceeds go directly to a named beneficiary rather than through the estate.1Mass.gov. Massachusetts Estate Tax Guide A life insurance payout that never touches the estate’s bank account still counts toward the $2 million threshold. That surprises a lot of families.
The executor, not the heirs, files Form M-706 and pays any tax owed from estate funds.
Taxes You May Still Owe on What You Inherit
Even without an inheritance tax, certain inherited assets carry their own tax consequences once they’re in your hands.
Inherited Retirement Accounts
Traditional IRAs, 401(k)s, and similar pre-tax retirement accounts are taxed as ordinary income when money comes out, and that rule doesn’t change because you inherited the account. Non-spouse beneficiaries who inherited after 2019 generally must empty the account by the end of the tenth year following the year the original owner died.3Internal Revenue Service. Retirement Topics – Beneficiary
The IRS has finalized rules requiring that if the original owner had already started taking required minimum distributions before death, non-spouse beneficiaries also have to take annual withdrawals during that 10-year window. You can’t just wait until year ten and cash out. Spreading distributions across the full ten years often lowers the total tax bill, because a lump sum can push you into a higher bracket for one year.
Capital Gains and the Step-Up in Basis
When you inherit property like real estate or stock, your cost basis resets to the asset’s fair market value on the date the owner died.4Internal Revenue Service. Gifts and Inheritances This step-up in basis means you’re only taxed on appreciation that happens after you inherit. Sell inherited stock soon after the death, and if the price hasn’t moved much, you may owe little or no capital gains tax. Hold it for years and sell at a higher price, and the gain is measured from the stepped-up value, not from what the deceased originally paid.
Property Taxes
Inherited real estate in Massachusetts remains subject to local property taxes. Once the property is yours, those annual bills are your responsibility. If the property has been reassessed at a higher value since the original owner bought it, the tax may be higher than what the previous owner was paying. Factor that ongoing cost into any decision about keeping the property.
The Federal Estate Tax
Federal estate tax is another layer, but one that only reaches very large estates. For 2026, the federal basic exclusion amount is $15 million per individual.5Office of the Law Revision Counsel. 26 U.S. Code 2010 – Unified Credit Against Estate Tax The increase came from the One, Big, Beautiful Bill Act signed in July 2025.6Internal Revenue Service. What’s New – Estate and Gift Tax Married couples can effectively double that exemption through portability, potentially sheltering up to $30 million.7Internal Revenue Service. Estate Tax
Estates above the federal exclusion pay a top rate of 40% on the excess. Like the Massachusetts version, the federal estate tax is paid by the estate, not by the heirs. Most Massachusetts estates that owe state tax won’t owe anything federally, because the $2 million state threshold is so much lower than the $15 million federal one.
What This Means for You as an Heir
If you’re inheriting from a Massachusetts resident, the state won’t tax you for receiving your share. The estate may owe Massachusetts estate tax, but that comes out of estate assets before distribution, so it affects the size of what you receive rather than creating a bill in your name. Your own tax exposure comes later and depends on the type of asset: ordinary income tax on withdrawals from inherited retirement accounts, capital gains tax (measured from the stepped-up basis) if you sell inherited property that has appreciated, and ongoing property tax on any real estate you keep.
If the deceased lived in a state that does impose an inheritance tax, look at that state’s rules, because your relationship to the deceased and the size of your share can both affect what you owe there.