Estate Tax vs Inheritance Tax in Ohio: What You Need to Know

Estate Tax vs Inheritance Tax in Ohio: What Heirs Actually Owe

By Wolterman Law Office  |  Updated June 4, 2026  |  Estate Planning, Tax Planning

Confusion about estate taxes and inheritance taxes is extremely common, and that confusion causes many families to make estate planning decisions based on a tax burden that does not actually exist. This guide explains the difference between the two taxes, what Ohio law actually says, and what tax obligations heirs may face when they sell inherited property.

What Is the Difference Between Estate Tax and Inheritance Tax?

These two taxes are frequently confused because both relate to transferring wealth at death, but they work differently and are paid by different parties.

An estate tax is levied on the total value of a deceased person's estate before any assets are distributed to heirs. The estate itself pays the tax, not the individual beneficiaries. The federal government imposes an estate tax, and some states impose their own in addition to the federal tax.

An inheritance tax is levied on the individual beneficiary based on what they receive. The heir pays the tax, not the estate. The rate often varies based on the heir's relationship to the deceased, with closer relatives paying lower rates or receiving exemptions. The federal government does not impose an inheritance tax. A handful of states do.

Does Ohio Have an Estate Tax in 2026?

No. Ohio repealed its state estate tax effective January 1, 2013. Before that date, Ohio imposed an estate tax on estates exceeding $338,333. Since the repeal, Ohio has had no state estate tax. This applies to all Ohio residents who die in 2013 or later, regardless of the size of their estate.

This is a meaningful distinction from states like Massachusetts, Oregon, and Washington, which still impose state estate taxes with exemptions as low as $1 million. Ohio families do not face those state-level taxes.

Does Ohio Have an Inheritance Tax in 2026?

No. Ohio does not impose a state inheritance tax. Beneficiaries who inherit money, property, or other assets from an Ohio decedent owe no Ohio tax on what they receive. This is true regardless of whether the heir is a spouse, child, sibling, or unrelated person.

This distinguishes Ohio from states like Pennsylvania, Iowa, Kentucky, Nebraska, New Jersey, and Maryland, which still impose inheritance taxes on certain heirs. If an Ohio resident inherits from a decedent in one of those states, the other state's inheritance tax may apply depending on where the assets are located.

What About the Federal Estate Tax?

The federal estate tax applies to estates that exceed the federal exemption amount. For 2026, the federal estate tax exemption is $13.99 million per individual, or approximately $27.98 million for a married couple using portability. Estates below those thresholds owe no federal estate tax.

The Tax Cuts and Jobs Act of 2017 doubled the federal exemption, but those provisions are scheduled to sunset at the end of 2025 unless Congress acts to extend them. If the sunset occurs, the exemption reverts to approximately $7 million per person (adjusted for inflation). As of the date of this article, the current exemption remains in effect, but families with larger estates should monitor legislative developments and plan accordingly.

Capital Gains Tax on Inherited Property in Ohio

While Ohio heirs owe no estate or inheritance tax, they may owe federal capital gains tax if they sell inherited property. The key concept here is the stepped-up basis.

When someone inherits property, the cost basis for tax purposes is stepped up to the fair market value of the property on the date of the original owner's death. This means the heir does not owe capital gains tax on appreciation that occurred during the deceased person's lifetime. Only appreciation after the date of death is subject to capital gains tax when the property is eventually sold.

For example: a parent purchased a home in 1990 for $80,000. At the time of their death in 2026, the home is worth $350,000. The heir inherits the home with a stepped-up basis of $350,000. If the heir sells the home immediately for $350,000, they owe no capital gains tax. If they hold it for two years and sell it for $400,000, they owe capital gains tax only on the $50,000 gain that occurred after the date of death.

The stepped-up basis is one of the most valuable tax benefits in the estate planning code. It is a strong argument for holding appreciated assets until death rather than gifting them during life, because lifetime gifts do not receive a stepped-up basis.

What Taxes Do Ohio Heirs Actually Face?

For most Ohio families, the practical tax picture after inheriting is straightforward. There is no Ohio estate tax and no Ohio inheritance tax. Federal estate tax applies only to estates above $13.99 million. Capital gains tax applies only if the heir sells inherited property that has appreciated since the date of death. Income tax applies to inherited retirement accounts (IRAs, 401(k)s) as distributions are taken, because those accounts were never taxed during the original owner's lifetime.

The area where families most commonly make costly mistakes is with inherited retirement accounts. The SECURE Act of 2019 eliminated the stretch IRA for most non-spouse beneficiaries, requiring most heirs to fully distribute inherited IRAs within 10 years. Failing to plan for the income tax on those distributions can result in a significant and avoidable tax bill.

This article is for general informational purposes only and does not constitute legal or tax advice. Tax laws change frequently and individual circumstances vary. Consult a licensed Ohio estate planning attorney and a qualified tax professional for advice specific to your situation.