No, Texas does not impose a state-level estate or inheritance tax. However, Texas residents are still subject to federal estate tax laws, which will change significantly after 2025 due to the expiration of the Tax Cuts and Jobs Act of 2017.
Understanding Federal Estate Tax
The federal estate tax is a tax imposed on the transfer of assets when an individual passes away. This tax applies to:
✅ Personal property transferred through wills, trusts, or state intestacy laws
✅ Life insurance payouts and financial account distributions
✅ Gifts made during a person’s lifetime that exceed annual limits
The U.S. estate tax system also includes:
📌 Estate Taxes – Applied before assets are distributed to heirs
📌 Gift Taxes – Limits on how much can be given tax-free during one’s lifetime
📌 Generation-Skipping Transfer Taxes – Applies when wealth is transferred to grandchildren or beyond
💡 Assets left to a spouse or a recognized charity are typically exempt from estate taxes.
Current Federal Estate Tax Exemption (2025 Limits)
For 2025, the federal estate tax exemption is:
💰 $13.99 million per individual
💰 $27.98 million for married couples
Any estate above these thresholds is subject to a 40% tax rate on the excess amount.
Portability of Estate Tax Exemption
The portability rule allows a surviving spouse to inherit any unused portion of their deceased spouse’s exemption.
📌 To take advantage of portability, the estate must file IRS Form 706 within nine months of the first spouse’s death.
📌 While this helps preserve the exemption, it does not protect against future appreciation of assets, which could still result in estate tax liability.
Upcoming Changes in 2026
🚨 On January 1, 2026, the higher exemption limits will expire due to the sunset of the Tax Cuts and Jobs Act.
✅ The estate tax exemption will drop to approximately $7 million per individual (adjusted for inflation).
✅ Without congressional action to extend current limits, more estates will be subject to federal estate tax after 2025.
Who is Affected by Federal Estate Tax?
While most Americans will not owe federal estate tax, certain high-net-worth individuals and business owners should take action before the exemption decreases.
📌 High-Net-Worth Individuals – Those whose estates exceed the exemption limits.
📌 Business Owners & Farmers – Family-owned businesses and agricultural properties may be impacted.
📌 Wealthy Retirees & Investors – Those with substantial investments, real estate, or multiple properties may need estate tax planning.
💡 Texans in these categories should consult with an estate planning professional to prepare for the upcoming tax law changes and ensure their assets are protected.
Final Thoughts
While Texas does not have a state estate tax, residents must still comply with federal estate tax laws. With the upcoming changes in 2026, now is the time for proactive estate planning to minimize tax liability and ensure wealth preservation for future generations.
📅 Need tax or estate planning advice? Schedule a Free Consultation today!
