Does Ohio Have an Inheritance Tax?

Even though Ohio doesn’t have an inheritance tax, there are still ways to reduce potential tax burdens on an inherited estate with proper tax planning for estates: does Ohio have an inheritance tax? The short answer is no—Ohio does not impose an inheritance tax. That’s one less thing to worry about when dealing with estate matters.

But before assuming an inheritance is completely tax-free, it’s important to consider other factors. Federal estate taxes, capital gains taxes, and income tax on certain assets could still come into play. Understanding how these taxes work can help you avoid surprises and plan for any potential tax liabilities.

Understanding Inheritance and Estate Taxes

What Is an Inheritance Tax?

An inheritance tax is a state-imposed tax that some beneficiaries must pay when they receive money or property from an estate. The tax rate typically depends on how closely related the beneficiary is to the deceased—the further the relation, the higher the tax.

Only six U.S. states still have an inheritance tax:

Iowa (phasing out in 2025)
Kentucky
Maryland
Nebraska
New Jersey
Pennsylvania

Since Ohio does not have an inheritance tax, heirs receiving assets from an Ohio estate won’t owe state taxes on their inheritance. However, if you inherit from someone who lived in a state that does have an inheritance tax, you may still have to pay.

What About Estate Taxes?

Estate tax is different from an inheritance tax. Instead of taxing beneficiaries, estate tax is charged against the total value of an estate before distributions are made.

Some states impose an estate tax, but Ohio does not.
At the federal level, estate tax only applies to estates worth more than $13.61 million in 2024.

Unless an estate is very large, federal estate tax won’t be a concern.

Does Ohio Have Other Taxes on Inherited Assets?

Even though Ohio doesn’t have an inheritance or estate tax, certain types of inherited assets can still trigger tax obligations. Here’s what to watch for:

Federal Estate Tax Considerations

While Ohio has eliminated its estate tax, the federal estate tax still applies to estates exceeding $13.61 million. This only affects a small percentage of estates, but if you or a family member has significant wealth, planning ahead is key.

Do You Have to Pay Capital Gains Tax on Inherited Property?

If you inherit property and later sell it, you could owe real estate capital gains tax, depending on how much the property has appreciated.

Thanks to the step-up in basis rule, the property’s value is adjusted to its fair market value at the time of inheritance.
If you sell the property soon after inheriting it, you likely won’t owe capital gains tax.
If the property increases in value over time and you sell it later, you may owe capital gains tax on the profit.

This is something to consider if you plan to hold onto an inherited home or investment property for several years.

Are Inherited Retirement Accounts Taxed?

Yes, in some cases. If you inherit a traditional IRA or 401(k), any withdrawals you take will be taxed as ordinary income.

Spouses who inherit an IRA can roll it into their own account and delay withdrawals.
Non-spouse beneficiaries may be required to withdraw the entire balance within 10 years, which can lead to a higher tax bill.

This makes it crucial to plan wisely when inheriting retirement assets.

Do Any Nearby States Have an Inheritance Tax?

Even though Ohio doesn’t have an inheritance tax, some neighboring states do. If you inherit from a family member in Pennsylvania or Kentucky, you might owe taxes there.

Pennsylvania – Inheritance tax rates range from 4.5% to 15%, depending on your relationship to the deceased.
Kentucky – The tax rate can go up to 16% for distant relatives or non-family heirs.

If you receive an inheritance from out-of-state family members, it’s worth checking that state’s tax laws.

How to Reduce Taxes on an Inheritance

Even though Ohio doesn’t have an inheritance tax, there are still ways to reduce potential tax burdens on an inherited estate with proper tax planning for estates:

Gifting Assets Early – Ohio residents can gift up to $18,000 per year (2024 limit) per person tax-free, which can help reduce estate size for federal tax purposes.
Using a Trust – Trusts can help avoid probate, provide tax advantages, and ensure assets are distributed according to your wishes.
Strategic IRA Planning – Converting a traditional IRA to a Roth IRA can help heirs avoid income tax on withdrawals.

If you’re expecting to leave or receive a large inheritance, working with a CPA can help you plan for potential tax implications.

FAQs: Does Ohio Have an Inheritance Tax?

Does Ohio Have an Estate Tax?

No, Ohio does not have an estate tax. It was eliminated in 2013.

Do You Have to Pay Tax on Inherited Money in Ohio?

No, Ohio does not tax cash inheritances, but certain assets—like retirement accounts and annuities—may be subject to income tax when withdrawn.

What Happens If I Inherit Property in Ohio?

If you inherit property and sell it, you may owe capital gains tax if the value has increased since inheritance. The step-up in basis rule helps reduce tax liability.

Which States Still Have an Inheritance Tax?

As of 2024, six states still impose an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.

Does Ohio Tax Out-of-State Inheritances?

No, Ohio does not tax inheritances, even if they come from another state. However, if the state where the deceased lived has an inheritance tax, you may have to pay it there.

Need Tax Advice? We Can Help

Even though Ohio doesn’t have an inheritance tax, federal estate taxes, capital gains tax, and income tax on inherited assets can still affect your finances. Proper planning can help minimize tax burdens and protect your wealth.

At Hogan CPA Financial Services, we specialize in estate tax planning, inheritance strategies, and financial consulting. Whether you’re navigating an inheritance or planning for your own estate, our team is here to help.