Does Texas Have an Estate Tax? What You Need to Know

Does Texas Have an Estate Tax? What You Need to Know

One of the most common questions we hear from clients is: "Will my family have to pay an estate tax when I die?" The short answer, if you live in Texas, is encouraging—but it's not the whole story.

Texas Does Not Have a State Estate Tax

Texas has no state estate tax, no state inheritance tax, and no state gift tax. That makes Texas one of the most tax-friendly states in the country for estate planning purposes. When you die, the State of Texas won't take a cut of your estate.

But that doesn't mean your estate is tax-free. The federal government has its own estate tax, and depending on the size of your estate, it can take a significant bite.

The Federal Estate Tax Still Applies

The federal estate tax applies to estates that exceed the exemption threshold. For 2026, the exemption is $7.15 million per individual, or roughly $14.3 million for a married couple using portability. Estates above that threshold are taxed at rates up to 40%.

Here's some important context: the current exemption amount is the result of the Tax Cuts and Jobs Act (TCJA) sunsetting at the end of 2025. The TCJA had roughly doubled the exemption to around $13 million per person. When it expired, the exemption reverted to its pre-TCJA level, adjusted for inflation—landing at approximately $7.15 million for 2026.

That means families who were well under the exemption a year ago may now have a taxable estate. If your net worth—including your home, retirement accounts, life insurance death benefits, business interests, and investments—exceeds $7.15 million, you need to plan for federal estate tax.

How Texas Compares to Other States

Some states impose their own estate taxes on top of the federal one, with exemptions as low as $1 million. States like Massachusetts, Oregon, and New York all have separate estate taxes. A few states—Iowa, Kentucky, Nebraska, and others—have inheritance taxes, which tax the people who receive the inheritance rather than the estate itself.

Texas has none of these. This is a meaningful advantage for Texas residents and one reason why estate planning in Texas can be more straightforward than in other states. But if you own property in a state that does have an estate or inheritance tax, that state may still tax the assets located there.

Understanding the Gift Tax

While Texas doesn't have a gift tax, the federal government does. The annual gift tax exclusion for 2026 allows you to give up to $19,000 per person per year without any tax consequences. Married couples can combine their exclusions to give up to $38,000 per person per year.

Gifts above the annual exclusion eat into your lifetime estate tax exemption. So if you give someone $50,000 in a single year, the first $19,000 is excluded, and the remaining $31,000 reduces your $7.15 million lifetime exemption. You won't owe any tax now, but your estate will have a slightly smaller exemption when you die.

Strategic gifting is one of the most effective ways to reduce your taxable estate over time. By giving assets away during your lifetime, you're moving them—and all their future growth—out of your estate entirely.

The Stepped-Up Basis Advantage

Here's a tax benefit that applies to almost every Texas family, regardless of estate size. When you inherit an asset, you receive it at its current fair market value—not the price the deceased originally paid for it. This is called a "stepped-up basis."

For example, if your parents bought a house for $150,000 and it's worth $500,000 when they die, your basis in the house is $500,000. If you sell it for $510,000, you only pay capital gains tax on the $10,000 gain—not the $360,000 difference from the original purchase price.

This rule saves families enormous amounts in capital gains taxes. It's one of the reasons why holding appreciated assets until death can be a better strategy than giving them away during your lifetime.

When to Talk to an Estate Planning Attorney

You should consult with an attorney about estate tax implications if:

• Your net worth exceeds $5 million (individual) or $10 million (married couple)—to leave room for growth
• You own a business that could be valued higher than you think
• You have significant life insurance policies (the death benefit counts toward your estate)
• You own real estate in states with their own estate tax
• You've been making large gifts and need to track your lifetime exemption usage

Tax laws change frequently. The TCJA sunset is a perfect example—what was a $13 million exemption is now roughly half that. Planning ahead gives you options; waiting until the rules change leaves you reacting.

Contact Dickey Law Group today to discuss how estate taxes may affect your family. We serve families in The Woodlands, Spring, Conroe, and throughout the Houston metro area. Call (832) 521-4414.