Does Indiana Have an Estate Tax?

No. Indiana has no state estate tax and no state inheritance tax. If you're an executor, a surviving spouse, or an heir trying to figure out what taxes apply after a death in Indiana, you can cross both of those off your list entirely.

This matters because a significant number of families — prompted by a quick Google search or advice from a well-meaning but outdated source — worry that Indiana will take a percentage of the estate before it passes to heirs. That concern is understandable but misplaced. Indiana repealed its inheritance tax for deaths occurring after December 31, 2012. There was no replacement estate tax. The state has not had either tax for over a decade.

That said, other taxes do apply after a death in Indiana, and not knowing the difference between "estate tax" and those other obligations is where executors get into trouble.

Indiana's Inheritance Tax Repeal

Indiana's inheritance tax was eliminated by the Indiana General Assembly effective January 1, 2013. Before that date, Indiana imposed a graduated tax on inheritances based on the relationship between the decedent and the beneficiary. Closer relatives paid lower rates; more distant relatives and unrelated beneficiaries paid higher rates.

That tax is gone. For any death occurring on or after January 1, 2013, no Indiana inheritance tax applies, regardless of estate size, the number of beneficiaries, or the relationship between them. Indiana also never enacted a replacement estate tax on the estate itself (as opposed to an inheritance tax on beneficiaries). The state has no estate tax at all.

Federal Estate Tax: The $15 Million Threshold

While Indiana imposes nothing at the state level, the federal estate tax still applies if an estate is large enough. Under the One Big Beautiful Bill Act (OBBBA) signed in 2026, the federal estate tax exemption for 2026 is $15,000,000 per individual.

What this means in practice: a single person can die leaving up to $15 million in assets — real estate, bank accounts, investment portfolios, retirement accounts, business interests, life insurance payable to the estate — without any federal estate tax liability. A married couple can shield up to $30 million combined (explained in the portability section below).

Federal estate tax only applies to the amount above the exemption, and the marginal rates on amounts above the exemption are steep (up to 40%). But for the overwhelming majority of Indiana estates, this is irrelevant. The median home value in Indiana is well below $300,000, and most estates — even those with a mix of real estate, retirement accounts, and investments — are nowhere near $15 million.

If you're an executor trying to figure out whether Form 706 (the federal estate tax return) applies, the threshold is straightforward: if the gross estate including all assets is below $15 million, no federal estate tax is owed. You are almost certainly not in the group that needs to worry about this.

What Taxes Do Apply After a Death in Indiana?

Even with no state estate or inheritance tax, and likely no federal estate tax, Indiana estates still face real tax obligations. Knowing what these are prevents both unnecessary panic and accidental non-compliance.

Final Indiana income tax return (Form IT-40). The deceased person's income from January 1 through the date of death is taxable. This return covers wages, retirement distributions, investment income, self-employment income, and anything else taxable in an ordinary year — but only through the date of death. This return is due April 15 of the following year.

Indiana fiduciary income tax return (Form IT-41). If the estate earns $600 or more in income after the date of death — rent from real property, interest in estate accounts, capital gains from selling inherited assets — that income is taxed at Indiana's flat rate of 3.23%. This is a separate return from the decedent's final IT-40, filed under the estate's own EIN, due by the 15th day of the fourth month after the close of the estate's taxable year.

Federal fiduciary income tax return (Form 1041). The federal equivalent of IT-41, applying to the estate's income. Indiana IT-41 instructions require completing Form 1041 first and attaching a copy to the state return.

Capital gains tax on inherited assets sold. When an heir sells inherited property, they may owe capital gains tax — but usually far less than they expect, thanks to the step-up in basis. Inherited property gets a new cost basis equal to the fair market value at the date of death. This can dramatically reduce or eliminate the capital gain. The step-up doesn't apply to inherited IRAs and 401(k)s, which are taxed as ordinary income when withdrawn.

The Indiana Final Tax & Estate Tax Guide at /us/indiana/estate-tax/ covers all of these Indiana-specific obligations in sequence, along with deadlines and forms for each.

Portability: Why Even Tax-Exempt Estates May Want to File Form 706

Here's a nuance that saves some families hundreds of thousands of dollars in future taxes, but only if they act within the deadline.

When one spouse in a married couple dies, any unused portion of their $15 million federal estate tax exemption can be transferred to the surviving spouse. This transfer is called the Deceased Spouse's Unused Exclusion (DSUE), and it's available through a concept called portability.

To elect portability, the executor of the deceased spouse's estate must file Form 706 (the federal estate tax return) within nine months of the date of death, even if no estate tax is owed. The form is simply used to make the election and report the unused exemption amount.

Consider a concrete example. A spouse dies leaving a $2 million estate to the surviving spouse. No federal estate tax is owed — the estate is well below the $15 million exemption. But the deceased spouse had a $15 million exemption, used none of it, and had $15 million in unused exclusion. If the executor files Form 706 and elects portability within nine months, the surviving spouse's future exemption becomes $15 million (their own) plus $15 million (DSUE from deceased spouse) = $30 million combined.

If the executor skips Form 706 because "no tax is owed and no filing is required," the DSUE is lost. The surviving spouse gets only their own $15 million exemption. If the surviving spouse later remarries and that spouse also predeceases them, a different DSUE applies — but the original deceased spouse's unused exclusion is gone.

For most Indiana families, $15 million is more than enough. But estates that include appreciating business interests, farmland, or investment portfolios — and Indiana has a lot of both — can grow significantly between the first spouse's death and the second. Capturing portability costs nothing beyond the effort of filing Form 706. Skipping it when the estate later exceeds $15 million creates a real tax liability that could have been avoided.

Annual Gift Exclusion: Reducing Future Estate Size

If you're engaged in estate planning for an Indiana resident — rather than managing an estate after a death — the annual gift tax exclusion is worth knowing. In 2026, each person can give up to $19,000 per year to any number of recipients without that gift counting against their lifetime estate tax exemption.

A married couple can give $38,000 per year to each recipient (called gift-splitting). Over time, systematic annual gifting can meaningfully reduce a taxable estate. This strategy matters more for estates approaching or above the $15 million federal threshold, but it's a widely-used tool for Indiana families with significant farm or business assets who want to transfer wealth during their lifetime.

The Bottom Line for Indiana Estates

Indiana imposes no state estate tax and no inheritance tax. For deaths occurring after December 31, 2012, the state has taken itself entirely out of the picture on this front.

Federal estate tax is a real concern — but only for estates above $15 million in 2026, a threshold most Indiana families will never approach. What remains are real but more manageable obligations: the final income tax return for the decedent, the fiduciary return for the estate's own income, capital gains considerations on inherited property, and a set of deadline-driven administrative tasks.

For a complete checklist of Indiana tax obligations after a death — including both income tax returns, the property tax notification requirement, small estate affidavit rules, and the full deadline calendar — see the Indiana Final Tax & Estate Tax Guide at /us/indiana/estate-tax/.

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