Do You Owe Taxes When Someone Dies in Texas? Here’s Why Most Estates Don’t.
When a loved one passes away, the last thing families want to worry about is navigating complex tax laws. Fortunately, most Texas estates don’t trigger estate, inheritance, or death taxes. In accordance to federal exemptions and state law, the vast majority of heirs and beneficiaries in Texas do not owe taxes when they inherit property.
Here’s what you need to know about estate taxes, inheritance taxes, the federal gift and estate tax exemption, and the capital gains rules related to inherited property.
Disclaimer:
This article is for informational purposes only and does not constitute legal or tax advice. While I am an attorney licensed in the State of Texas, I am not a tax professional, and readers should consult with a certified public accountant (CPA) or tax advisor regarding any tax-related questions or concerns. Every estate is unique, and tax implications may vary based on individual circumstances and evolving laws.
No Inheritance Tax in Texas
Let’s start with the good news: Texas does not have an inheritance tax.
Unlike some other states (like Pennsylvania or Kentucky), Texas residents don’t owe any state tax just because they received an inheritance. Whether you inherit cash, real estate, or personal property, Texas will not tax you for receiving that gift.
Federal Estate Tax: Who Has to Pay?
While there’s no Texas estate tax, there is still a federal one, but it only applies to very large estates.
When someone dies, the value of everything they owned (cash, real estate, investments, life insurance, business interests) is added up. Suppose that the total is more than the federal estate tax exemption. In that case, the estate may owe tax before distributing anything to heirs.
However, the exemption is quite high. As of 2025, the federal estate and gift tax exemption is:
$13.99 million per individual
$27.98 million for married couples
That means if the estate is worth less than that amount, it won’t owe any federal estate tax. And for most families in Texas, the total estate value is well below these limits.
Bottom line: No estate tax will be due if your loved one’s estate is worth less than $13.99 million. Please note that this exemption value changes from year to year. You will need to verify the exemption amount for the year that your loved one died.
What About Gift Taxes?
You might’ve heard about the federal gift tax and wondered whether gifts made during someone’s lifetime could cause a tax problem after their death.
Here’s how it works:
The federal gift tax only applies when a person gives more than $19,000 to a single person in one year (as of 2025).
Even then, the excess amount reduces their lifetime estate and gift tax exemption (the same $13.99 million discussed above).
Most people never come close to exceeding the exemption, so they won’t owe gift tax—and neither will their estate.
In short, gifts under $19,000 per year per person are tax-free, and even larger gifts rarely result in a tax bill unless someone is giving away millions of dollars.
Step-Up in Basis: Why Inherited Property May Be Tax-Free
One of the biggest tax benefits of inheriting property is something called the “step-up in basis.” This concept can dramatically reduce—or even eliminate—capital gains tax on inherited assets.
Here’s how it works:
When someone inherits real estate, stocks, or other appreciated assets, they receive the asset at its fair market value on the date of death.
This is called a “step-up in basis” because it adjusts the original purchase price (or “basis”) to reflect the current value.
When the heir sells the property, they only owe capital gains tax on any appreciation after the date of death—not from when the original owner purchased it.
Example:
If your parent bought a house in 1990 for $100,000, and it was worth $300,000 when they passed away in 2025, your basis becomes $300,000. If you sell it a few months later for $310,000, you only pay capital gains tax on the $10,000—not the $210,000 increase since 1990.
This rule can save heirs thousands in capital gains tax and makes inherited property one of the most tax-advantaged assets you can receive.
Final Thoughts
For most Texas families, tax concerns after a loved one’s death are minimal. There’s no Texas inheritance tax, and only very large estates ever owe federal estate tax. Plus, the step-up in basis means you’re unlikely to pay capital gains tax on inherited property unless it appreciates after you inherit it.
Still, planning and understanding how your estate or inheritance fits the bigger picture is essential.
