Federal Estate Tax in Indiana

Most Indiana families owe no estate tax at all. Indiana repealed its inheritance tax for anyone who died after December 31, 2012, it collects no estate tax, and it charges no probate tax on the value of an estate. The one estate-level tax that can still reach an Indiana estate is the federal estate tax, and it applies only above a $15 million per-person exclusion for 2026. To check a specific estate against the current thresholds, run the numbers in the Indiana estate tax calculator.

A large estate, or a filing choice for a surviving spouse, can still make the federal rules matter. This guide walks through the estate and inheritance tax posture in Indiana: why the state takes nothing, the current federal exclusion, the portability election, what counts in the estate, and how the estate tax differs from the income-tax question you face when you later sell an inherited asset. Treat it as a planning map, and confirm any figure that affects a specific estate with a tax professional.

Indiana Has No State Estate or Inheritance Tax

Start with the good news for Indiana families: the state imposes no estate tax and no inheritance tax on deaths today.

Indiana once ran an inheritance tax, and search results still carry years of outdated pages that describe it. That tax is gone. House Enrolled Act 1001 (2013) repealed the inheritance tax, the estate tax, and the generation-skipping tax. Under IC 6-4.1-1-0.5, the inheritance tax chapter does not apply to a property interest transferred by a decedent whose death occurs after December 31, 2012. The Indiana Department of Revenue confirms the result in Departmental Notice #44: for a death after that date, no Indiana inheritance tax is due and no inheritance tax return is required.

Indiana's estate tax fell the same way. It was a "pick-up" tax pegged to the federal credit for state death taxes, so it only ever collected what the federal government already credited back. When Congress phased that credit out, the number the Indiana tax rested on dropped to zero, and no Indiana estate tax has applied to anyone who died after December 31, 2004. The 2013 repeal then took the estate tax and the generation-skipping tax off the books, effective January 1, 2013.

Indiana also charges no probate tax on the value of an estate. Opening an estate costs flat court filing fees, publication charges, and recording fees, not a tax on what the estate is worth. See the Indiana probate guide for how those court costs work.

One narrow exception is worth naming. Estates of people who died before January 1, 2013 could still owe Indiana inheritance tax under the old law, a rare and shrinking set of cases. If you are settling a death from that era, ask a tax professional whether a legacy inheritance tax return remains open.

Two cautions round this out. If you inherit property in another state, or from someone who lived in a state that does levy an estate or inheritance tax, that other state's rules can reach the property inside its borders. Living in Indiana does not shield out-of-state property from another state's death tax. And Indiana still has an income tax, so a final individual return, and a fiduciary return if the estate earns income during administration, can still come due. More on that below.

The Federal Estate Tax Exclusion

The federal estate tax reaches only estates whose value climbs above the federal exclusion, the exemption threshold set by federal law.

For deaths in 2026, the federal estate tax exclusion is $15 million per person. In plain terms:

One person can pass up to $15 million free of federal estate tax.
A married couple can shield up to $30 million using portability, covered below.
Only the amount above the exclusion is taxed.
The top federal estate tax rate is 40 percent.

The exclusion is indexed for inflation, so it rises in later years. Because the tax bites only the amount over $15 million, the effective rate across a whole estate always lands below 40 percent, and for almost every Indiana estate it is zero.

A Note on the 2026 Law

Many older planning documents warned that the exclusion would roughly cut in half at the start of 2026 under a sunset written into the 2017 tax law. That sunset did not take effect. Under current federal law the exclusion stands at $15 million per person for 2026 and is indexed each year after that. If your plan holds trusts or gifting steps built around a smaller exclusion, review them with your attorney, because the design may no longer fit and could work against the step-up in basis your heirs would otherwise receive.

What Counts in the Gross Estate

The "gross estate" for federal purposes is wider than what passes through probate or gets listed in a will. It generally takes in:

Real estate, bank and brokerage accounts, stocks, and bonds
Life insurance proceeds on a policy the decedent owned or controlled, since ownership, not who the beneficiary is, drives inclusion
Retirement accounts such as IRAs, 401(k)s, and 403(b)s
Business interests, farmland, and closely held company stock
The decedent's share of jointly owned property
Assets in a revocable living trust
Certain gifts made within three years of death, above all transfers of life insurance
Powers of appointment the decedent held

Someone with a paid-off Indiana home, a sizable IRA, and a life insurance policy can hold a gross estate far bigger than their probate estate, because most of those assets pass outside probate but still count for the federal tax. The gross estate then drops by debts, funeral and administration costs, and the deductions below to reach the taxable estate.

Deductions That Shrink the Taxable Estate

Two deductions wipe out federal estate tax for most families, even wealthy ones.

Unlimited marital deduction. Property left outright to a surviving spouse who is a U.S. citizen passes free of federal estate tax with no dollar cap. This is why most married couples owe nothing when the first spouse dies. The tax is deferred, not erased, and can surface when the second spouse dies.

Unlimited charitable deduction. Property left to a qualified charity is fully deductible from the estate, dollar for dollar.

Debts, funeral costs, and estate administration expenses also reduce the taxable estate. The Indiana creditor claims guide covers how valid debts get paid before anything is distributed.

Portability: The Filing That Can Save a Spouse Millions

When the first spouse in a marriage dies, their unused federal exclusion does not disappear on its own. Under the portability election, the surviving spouse can claim the deceased spouse's unused exclusion, called the deceased spousal unused exclusion, or DSUE, and add it to their own.

Here is how it plays out. A husband dies in 2026 with a $4 million estate and uses $4 million of his $15 million exclusion. His remaining $11 million can move to his wife. She then holds her own $15 million plus his $11 million, a combined $26 million shielded from estate tax.

Now the trap. Portability is not automatic. The executor has to file IRS Form 706, the United States Estate Tax Return, to make the election. The return is due nine months after death, with a six-month extension available. Portability requires that filing even when the estate owes no tax and sits far below the exclusion.

Many families skip Form 706 because they figure they owe nothing. That choice can cost a surviving spouse a great deal if the couple's combined estate later grows past one exclusion. Filing only to preserve portability is a modest step an attorney can handle.

When Form 706 Must Be Filed

File Form 706 when any of these fit:

The gross estate plus adjusted taxable gifts tops the exclusion, so tax may be owed.
You want to elect portability to preserve the deceased spouse's unused exclusion.
The estate has generation-skipping transfers to allocate.

The return is due nine months after the date of death. Form 4768 grants an automatic six-month filing extension, but any tax owed is still due at the nine-month mark, since the extension covers filing, not payment. Form 706 is one of the more demanding federal returns, so estates that must file it usually benefit from a CPA or estate attorney to document valuations, claim deductions, and elect portability correctly.

Gifts During Life and the Annual Exclusion

The federal gift tax and estate tax are unified, which means lifetime gifts and transfers at death draw on the same lifetime exclusion.

Annual gift exclusion. For 2026, you can give up to $19,000 per recipient in a year without touching your lifetime exclusion or filing a gift tax return. A married couple can give $38,000 per recipient, with no cap on the number of recipients.

Gifts that never count. Some transfers sit entirely outside the gift tax: amounts paid directly to a medical provider for someone's care, amounts paid directly to a school for someone's tuition, gifts to a spouse, and gifts to qualified charities.

Larger gifts. A gift above the annual exclusion uses part of your lifetime exclusion and calls for IRS Form 709. Filing that return does not mean you owe tax; it records the gift against your lifetime amount. Because the interplay among gift tax, estate tax, and capital gains can get involved, ask a tax professional before making large lifetime gifts.

Estate Tax Is Not the Same as the Step-Up in Basis

Two different taxes get mixed up here, so keep them apart.

The federal estate tax is a transfer tax on the value of the estate at death. It applies only above the $15 million exclusion, so it reaches almost no one.

The step-up in basis is an income-tax rule that touches nearly every inherited asset, whatever the estate is worth. Under Internal Revenue Code Section 1014, an inherited asset's cost basis resets to its fair market value on the date of death. That reset lowers the capital gains tax an heir owes when they later sell. Indiana is a separate-property (common-law) state, so only the decedent's share of jointly owned property steps up.

For the great majority of Indiana families, the step-up is the tax rule that actually matters, not the estate tax. The Indiana step-up in basis guide works through the math, and if a sale is coming, the guide to selling inherited property in Indiana covers the title and gain side. When you sell an inherited home, the stepped-up basis usually shrinks the taxable gain to the price growth since the date of death, not the growth since the original purchase.

Practical Takeaways for Indiana Families

Most Indiana estates need no estate tax planning at all. The exclusion is high, and Indiana adds no state layer. The usual moves are these:

Confirm you are under the exclusion. Add up everything, including life insurance you own and retirement accounts, not just probate assets. If the total sits well below $15 million, no federal estate tax applies.
Preserve portability for a married couple. If one spouse dies, weigh filing Form 706 to lock in the unused exclusion, even when no tax is due. It is a low-cost safeguard.
Lean on the step-up. Holding appreciated assets until death gives heirs a stepped-up basis. Gifting those same assets during life hands the recipient your old basis and wastes the step-up.
Handle the income-tax tasks Indiana still expects. Check whether a final Indiana individual return (Form IT-40) is needed, and whether estate income calls for an Indiana fiduciary return (Form IT-41). County local income tax can apply for the year of death.
Get help when the estate is genuinely large or complicated. Business interests, farmland, out-of-state property, blended families, or an estate near the exclusion are the cases where an attorney and CPA earn their fee.

To see who inherits when there is no will, read the Indiana intestate succession guide. For the personal representative's role in filing returns and paying debts, see the Indiana executor duties guide, and for planning tools that keep assets out of court, start with how to avoid probate in Indiana.

Frequently Asked Questions

Does Indiana have an estate tax or inheritance tax?

No. Indiana has no estate tax, and its inheritance tax does not apply to a decedent whose death occurs after December 31, 2012 (IC 6-4.1-1-0.5). The only estate-level tax an Indiana family can face is the federal estate tax, and it reaches only estates above the federal exclusion.

When did Indiana repeal its inheritance tax?

House Enrolled Act 1001 (2013) repealed Indiana's inheritance tax, estate tax, and generation-skipping tax. The inheritance tax repeal covers any death after December 31, 2012, and the estate and generation-skipping repeals took effect January 1, 2013. The Indiana Department of Revenue confirms the change in Departmental Notice #44.

How much can I leave without owing federal estate tax?

For deaths in 2026, the federal estate tax exclusion is $15 million per person. A married couple can shield up to $30 million using portability. Only the amount above the exclusion is taxed, at rates up to 40 percent.

Do I need to file an Indiana estate tax return?

No. Indiana requires no estate tax or inheritance tax return for a death after December 31, 2012. You may still need to file the decedent's final Indiana individual income tax return (Form IT-40) and an Indiana fiduciary return (Form IT-41) if the estate earns income during administration.

Is money I inherit taxed in Indiana?

No. Indiana has no inheritance tax for deaths after 2012, and an inheritance is generally not Indiana income to the person who receives it. You may owe capital gains tax later if you sell an inherited asset for more than its stepped-up basis, and other states can tax property located inside their borders.

This guide is general information about Indiana estate and inheritance tax. It is not legal advice, and it is not tax advice. Verify every dollar figure and filing deadline here with the Indiana Department of Revenue, the IRS, or a licensed Indiana tax professional before you act.

Sources:

Title: Indiana Code 6-4.1-1-0.5, Applicability of Chapter. Publisher: Indiana General Assembly. Publication Date: 2025. URL: https://iga.in.gov/laws/2025/ic/titles/6#6-4.1-1-0.5
Title: Departmental Notice #44, Repeal of the Inheritance Tax, Estate Tax, and Generation Skipping Tax. Publisher: Indiana Department of Revenue. Publication Date: September 2023. URL: https://www.in.gov/dor/files/dn44.pdf
Title: Indiana Code 6-3-2-1, Imposition of Tax; Tax Rate. Publisher: Indiana General Assembly. Publication Date: 2025. URL: https://iga.in.gov/laws/2025/ic/titles/6#6-3-2-1
Title: Estate Tax. Publisher: Internal Revenue Service. Publication Date: 2025. URL: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
Title: IRS Releases Tax Inflation Adjustments for Tax Year 2026. Publisher: Internal Revenue Service. Publication Date: 2025. URL: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026
Title: About Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Publisher: Internal Revenue Service. Publication Date: 2025. URL: https://www.irs.gov/forms-pubs/about-form-706
Title: 26 U.S. Code Section 1014, Basis of Property Acquired From a Decedent. Publisher: Cornell Law School Legal Information Institute. Publication Date: Not listed. URL: https://www.law.cornell.edu/uscode/text/26/1014

It is not legal advice.