The threshold for inheritance tax varies depending on the state and the relationship between the deceased and the beneficiary. In 2023, there is no federal inheritance tax, and only six states impose a state-level one. The IRS exempts estates of less than $12.92 million from the federal estate tax in 2023. Most states only apply tax to an inheritance above a certain amount, and they charge a percentage of this sum, which may be flat or graduated. For example, Kentucky imposes a rate that ranges from 4% to 16%, rising as the inheritance amount does, from $1,000 to over $200,000. It also imposes a flat dollar figure, ranging from $30 to $28,670, based on the sum inherited. Inheritance tax rates often depend on the heir’s relationship to the deceased. A surviving spouse is usually exempt from state inheritance tax. Some states tax a deceased persons children but at a low rate. More distant relatives or heirs who arent related to the deceased usually face the highest inheritance tax rates.

To summarize, the threshold for inheritance tax varies depending on the state and the relationship between the deceased and the beneficiary. There is no federal inheritance tax in 2023, and the federal estate tax applies to estates larger than $12.92 million. Most states only apply tax to an inheritance above a certain amount, and they charge a percentage of this sum, which may be flat or graduated.