Neither New York nor California: these are the states with the lowest inheritance taxes in the U.S.

In the U.S., most states charge neither inheritance tax nor estate tax on top of the estate levies paid at federal level. And in only one state in the country is there the potential for a triple whammy.

Moreover, as USA Today’s personal finance reporter Medora Lee points out, estate-tax exemption thresholds that reach seven and even eight figures mean many people may escape a significant tax bill. In addition, surviving spouses benefit from tax breaks.

What’s the difference between inheritance tax and estate tax?

As explained by Tax Foundation expert Joseph Johns, the difference between estate and inheritance tax comes down to three chief questions: When in the inheritance process is the tax levied? What is being taxed? And who pays the tax?

“Estate taxes are paid by a decedent’s estate before assets are distributed to heirs and are thus imposed on the overall value of the estate,” Johns says. An inheritance tax, on the other hand, is based only “on the amount distributed to each beneficiary”, he explains. The beneficiary pays this levy when they receive the asset bequeathed to them.

Assuming both taxes were to carry the same rate and exemptions, there would be no difference between estate and inheritance tax in a scenario involving a sole heir, notes the Investopedia financial journalist Janet Berry-Johnson.

Such a same-difference scenario cannot apply, of course, if federal estate tax and state inheritance tax are both due on bequeathed assets. This is a possibility in a handful of states in the U.S.

Meanwhile, almost a quarter of the country’s states and districts may not charge inheritance tax, but do have an estate tax of their own. And, as mentioned above, one state has all three levies: federal estate tax, state inheritance tax and state estate tax.

Which states in the U.S. charge inheritance tax?

Per the Tax Foundation, six states in the U.S. have an inheritance tax: Iowa, Kentucky, Nebraska, New Jersey, Pennsylvania and Maryland. It is in Maryland that federal estate tax is complemented by both a state inheritance tax (of up to 10%) and a state estate tax (up to 16%).

Iowa has the lowest state inheritance tax, at a maximum of 2%. Kentucky and New Jersey have the highest, at a top rate of 16%, but they are among a group of three states that offer exemptions up to a certain value cut-off point. At $100,000, Nebraska’s is the most generous.

It should also be noted that surviving spouses are exempt from any of these inheritance taxes, the Tax Foundation says.

Which states in the U.S. charge estate tax?

Maryland is one of 13 states and districts that levy a state estate tax on assets. The highest are in Hawaii and Washington, which have maximum rates of 20%. Maine and Connecticut have the lowest top estate tax bands, at 12%, while the latter state also offers by far the highest exemption threshold, at $13.61 million.

Every state with its own estate tax has an initial exemption of at least $1 million. And, as Smart Asset expert Ashley Kilroy explains, there is a “marital deduction” which allows assets to be passed to a surviving spouse without being taxed.

How much is federal estate tax?

Federal estate tax has a top rate of 40%, the Tax Foundation notes, but the exemption threshold now stands at $13.99 million. This, the Internal Revenue Service (IRS) says, means that “most relatively simple estates […] do not require the filing of an estate tax return.”

The IRS also notes that other federal estate tax exemptions include assets that are passed to surviving spouses, and those given to “qualified charities”.

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