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When a loved one dies, families often want to know whether Indiana will tax the money, real estate, investments, or other property they inherit. The answer is straightforward: Indiana does not currently impose an inheritance tax. Indiana also does not currently impose a separate state estate tax. Still, other tax rules can matter, including federal estate tax, income tax on certain inherited assets, and capital gains tax if inherited property is later sold.
At Mattox & Wilson, we help Indiana families plan how property will pass, coordinate wills, trusts, beneficiary designations, and other estate planning tools, and address probate and estate administration when a loved one dies. This guide explains what Indiana families should know about inheritance taxes and the other tax issues that can arise after a death.
Questions about an inheritance, probate, or your estate plan? Call Mattox & Wilson at (812) 944-8005 to schedule a consultation.
No. Indiana’s inheritance tax was repealed in 2013 for individuals who died after December 31, 2012. The Indiana Department of Revenue states that transfers from people who died after that date are not subject to Indiana inheritance tax and that there is now no Indiana inheritance tax owed.
The repeal became effective January 1, 2013. For additional background, see the Indiana Department of Revenue inheritance tax guidance and Departmental Notice #44, which addresses the repeal of Indiana inheritance, estate, and generation-skipping taxes.
An inheritance tax is generally imposed on a beneficiary because the beneficiary receives property from a person who died. In jurisdictions that impose one, the amount can depend on factors such as the value of the inheritance and the beneficiary’s relationship to the person who died. Indiana once had this type of tax, but it no longer does.
Indiana’s former inheritance tax applied to transfers from individuals who died before January 1, 2013. Indiana Department of Revenue guidance now states that no Indiana inheritance tax returns for residents or nonresidents should be prepared or filed after October 5, 2023, and that there is no inheritance tax owed in Indiana. Families dealing with an unusually old estate or unresolved historical tax matter should obtain advice based on the specific facts rather than relying on rules that apply to current estates.
No. Indiana currently imposes neither a state inheritance tax nor a separate state estate tax. Indiana Department of Revenue Departmental Notice #44 explains that Indiana repealed its inheritance tax, estate tax, and generation-skipping tax. This means an Indiana estate is not subject to a current Indiana death tax merely because property passes at death.
However, that does not mean every estate or beneficiary is free from all tax consequences. Federal estate tax can apply to sufficiently large estates, and inherited assets can create income or capital gains tax consequences depending on the type of property and what happens after the inheritance.
The terms are often used interchangeably in everyday conversation, but they describe different taxes. An inheritance tax is generally imposed on a person who receives an inheritance. An estate tax is imposed on the taxable estate before the remaining property is distributed to beneficiaries. Indiana currently imposes neither tax.
The federal government does impose an estate tax on estates that meet the federal requirements, but there is no general federal inheritance tax imposed simply because a beneficiary receives inherited property.
Yes. Indiana does not impose its own estate tax, but federal estate tax can apply to larger estates. For a person who dies in 2026, the federal basic exclusion amount is $15 million. The Internal Revenue Service states that the 2026 amount increased from $13.99 million for people who died in 2025.
The filing calculation is more detailed than simply comparing probate assets with $15 million. The IRS explains that a federal estate tax return generally is required when the decedent’s gross estate, increased by adjusted taxable gifts and the applicable specific gift tax exemption, exceeds the filing threshold for the year of death. See the IRS Estate Tax page and the IRS 2026 estate and gift tax update.
Yes. A federal estate tax return may be important even when an estate is below the ordinary filing threshold. For example, an estate of a married person may file Form 706 to elect portability of the deceased spouse’s unused exclusion amount for the surviving spouse when the federal requirements are satisfied. Families with substantial assets, lifetime taxable gifts, closely held businesses, or portability concerns should coordinate estate planning with appropriate tax advisors.
Usually, the act of receiving inherited property does not itself create federal taxable income for the beneficiary. The IRS states that, in most cases, property received as a gift, bequest, or inheritance is not included in income. However, income produced by inherited property can be taxable after the beneficiary receives it.
Examples can include:
For federal guidance, see IRS Publication 525, Taxable and Nontaxable Income and IRS Publication 559, Survivors, Executors, and Administrators.
Possibly. Receiving inherited property and later selling it are separate tax events. A beneficiary who sells inherited real estate, stocks, or other capital assets may have a taxable gain if the sale price exceeds the beneficiary’s tax basis in the property.
Under federal tax rules, the basis of property inherited from a decedent is generally its fair market value on the date of death. Different rules can apply when an estate properly elects an alternate valuation date, uses certain special valuation rules, or when another statutory exception applies. This date-of-death valuation rule is commonly described as a step-up in basis when the property increased in value during the decedent’s lifetime, although the actual basis can also be lower than the decedent’s basis if the property declined in value.
If inherited property is later sold for more than the applicable basis, the difference may result in taxable gain. The IRS also has special consistent-basis reporting requirements for certain property reported for federal estate tax purposes.
The IRS explains these rules in its Gifts and Inheritances FAQ and Publication 551, Basis of Assets. Because basis can significantly affect the tax due on a later sale, beneficiaries should preserve appraisals and other records establishing the value of inherited property.
They can be. Inheriting an IRA or retirement account is different from inheriting cash in an ordinary bank account. The IRS states that beneficiaries of traditional IRAs generally must include taxable distributions in gross income. The timing and amount of required distributions depend on the type of account, the beneficiary’s relationship to the original owner, and other federal rules.
Roth IRAs and other retirement arrangements can be subject to different tax and distribution rules. Because inherited retirement accounts are governed by detailed federal requirements, beneficiaries should confirm the applicable rules before taking or delaying distributions.
No. Tax and probate are separate issues. The fact that Indiana does not impose an inheritance tax does not determine whether an estate must be opened or administered through probate.
Probate is the legal process used to administer probate property after death. Depending on the estate, the process can include proving a will, appointing a personal representative, identifying and protecting estate assets, addressing enforceable claims and expenses, and distributing remaining property under the will or Indiana intestacy law.
Whether a particular asset passes through probate depends largely on how the asset is titled and whether a valid nonprobate transfer mechanism applies. Assets that may pass outside probate can include:
The existence of a will alone does not make property nonprobate. A will generally directs the disposition of probate property and is administered through the probate process when probate is required.
When a person dies without a valid will, the person is considered to have died intestate. Indiana’s intestate succession law determines who receives probate property that is not otherwise transferred outside the estate. The distribution is not simply a rule that a spouse always receives everything. The result depends on which relatives survive the decedent and, in some situations, family relationships and the source or character of certain property.
Indiana law contains principal rules governing intestate distribution. Depending on the circumstances, a surviving spouse, descendants, parents, siblings, or more remote relatives may inherit. If probate administration is required, an interested person may petition the court for the appointment of a personal representative to administer the estate.
You can review the current statutory framework through the Indiana General Assembly’s Indiana Probate Code. Because intestate shares depend on the family structure, a specific inheritance should be evaluated under the statute rather than a simplified family-order list.
Avoiding a state inheritance tax is only one possible tax consideration, and Indiana’s repeal did not eliminate the need for estate planning. We use estate planning to help clients decide who should receive property, who should act for them during incapacity, how minor children or vulnerable beneficiaries should be protected, and how assets should be coordinated so that the plan works as intended.
Depending on your goals, an estate plan may help you:
If you want to review how your assets would pass under your current plan, call Mattox & Wilson at (812) 944-8005 to schedule a consultation.
We recommend reviewing an estate plan periodically and whenever a major life, financial, or legal change occurs. A plan that worked years ago may no longer match your family structure, assets, beneficiary designations, or goals.
Consider reviewing your plan after events such as:
At Mattox & Wilson, we help Indiana individuals and families create and update wills, trusts, powers of attorney, advance directives, and coordinated estate plans. We also assist families with probate and estate administration after a death. When tax issues require specialized accounting or tax advice, we can help clients identify the legal issues that should be addressed and work alongside their tax professionals as appropriate.
Indiana’s lack of an inheritance tax can simplify one part of the transfer process, but it does not answer every question about inherited property. Federal estate tax, retirement-account distributions, income produced by inherited assets, basis, capital gains, probate, and beneficiary designations may all affect the final result.
To discuss an Indiana estate plan, probate matter, or inheritance question, call Mattox & Wilson at (812) 944-8005 to schedule a consultation.