NJ’s inheritance tax: What you pay when a loved one passes away

⚫ New Jersey's inheritance tax depends on how close you are to the decedent

⚫ Certain relatives are exempt

⚫ New Jersey no longer has an estate tax

New Jersey is a less expensive state to die in these days, but it's one of just a handful of states with an inheritance tax still on the books.

That means, if someone you love passes away and leaves something behind for you, the state may be entitled to some.

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And an even smaller group of states, including New Jersey, has an inheritance tax structure that gives preferential treatment to beneficiaries who are closest to the decedent. More distant beneficiaries, like distant relatives, are charged a higher tax.

What is New Jersey's inheritance tax?

When someone passes away, an inheritance tax is not attached to every dollar or piece of property they want others to receive.

Exemptions exist for certain individuals and entities:

👍🏽 Spouse

👍🏽 Civil union partner (after Feb. 19, 2007)

👍🏽 Domestic partner (after July 10, 2004)

👍🏽 Child (including legally adopted child)

👍🏽 Grandchild, great-grandchild, etc.

👍🏽 Parents, grandparents, etc

👍🏽 Stepchild

👍🏽 501(c)3 charities

👍🏽 Religious institutions

👍🏽 Educational and medical institutions

For a decedent's siblings, sons-in-law, and daughters-in-law, the first $25,000 of inherited property is untaxed. The tax then varies from 11% to 16%, depending on the amount received.

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"Class D relatives," aka aunts and nephews, and any other beneficiary not mentioned above, are tied to a 15% tax on the first $700,000 received from a decedent. Beyond $700,000, the gift is taxed at a rate of 16%.

Does NJ have an estate tax?

According to the Tax Foundation, New Jersey in 2024 was one of six states — and the District of Columbia — with an inheritance tax.

Most states have neither an inheritance tax nor an estate tax.

New Jersey officially phased out its estate tax — levied on a dead person's assets — in 2018.

Still, an inheritance tax can be viewed as burdensome and may be a reason that folks look to live elsewhere, particularly when they're older, according to Manish Bhatt, senior policy analyst at the Tax Foundation.

"They may consider whether or not New Jersey is the place they want to continue living in, to continue paying taxes, because they ultimately might see a significant portion of their wealth eroded when they would have otherwise wanted to pass it along to their heirs," Bhatt told New Jersey 101.5.

A federal estate tax applies to folks who pass away and have a minimum of about $14 million in assets.

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