Texas Estate Tax in 2026: No, But Here's What You Do Owe
Texas has no state estate tax and no inheritance tax. That's been true since 2015. Even in 2026, no Texan owes a dime to the state of Texas when a family member dies, no matter how large the estate. But federal rules can still apply, and out-of-state property complicates things. Here's the full picture for 2026.
Quick Answers
Does Texas have an estate tax in 2026? No. Texas has no state-level estate tax and never has.
Does Texas have an inheritance tax in 2026? No. Texas eliminated its inheritance tax in 2015 under House Bill 254, and the state has no plans to bring one back.
Do Texans owe any tax when someone dies? Sometimes. The federal estate tax applies if the estate exceeds the IRS exemption (currently in the $15M+ range, indexed annually). Out-of-state heirs may owe their own state's inheritance tax even if the deceased lived in Texas. Income earned by the estate during probate is also taxable.
What Texas Did to the Inheritance Tax in 2015
Texas had a "pickup tax" before 2015. It piggybacked on the federal estate tax credit. When Congress phased out that credit in 2005, the Texas tax went to zero in practice but stayed on the books for another decade as a dead letter.
House Bill 254, signed by Governor Abbott in 2015, finally repealed it. Texas now has no mechanism, no rate schedule, and no machinery to tax estates or inheritances at the state level. There's no proposal in Austin to bring one back, and no political appetite for one.
That puts Texas in the company of 32 other states with no estate or inheritance tax. It doesn't exempt Texans from federal rules.
The Federal Estate Tax: When Texas Estates Still Owe
Federal estate tax applies only to very large estates. For 2026, the exemption sits at roughly $15 million per person, or about $30 million for a married couple, indexed annually for inflation. Estates below that threshold owe nothing federally. Above it, the rate climbs to 40% on the excess.
A single person who dies in 2026 with a $20 million estate owes federal estate tax on the $5 million over the exemption, or about $2 million before deductions and credits.
Most Texas families don't come close. Three groups should pay attention.
Business owners whose company valuation has run up. A successful Houston-area construction firm, oilfield services company, or medical practice can cross the federal threshold quietly when real estate, equipment, and goodwill stack up on the books.
Long-time real estate holders. A family that bought The Woodlands acreage in the 1980s, or built up rental properties across Spring and Tomball over 30 years, can find the combined estate well into eight figures.
Households with concentrated equity compensation. Tech and energy executives in The Woodlands and Cypress with vested Restricted Stock Units (RSUs), stock options, and Employee Stock Purchase Plan (ESPP) shares can be surprised how fast a portfolio crosses the line in a bull market.
For these families, step-up in basis at death, lifetime gifting, and trust structures all have real dollar impact.
The Out-of-State Trap
Six states still have inheritance taxes: Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and (phasing out) Iowa. Several tax the heir based on where the heir lives, not where the deceased lived.
A Spring widow leaves $100,000 to her nephew in Philadelphia. Pennsylvania's inheritance tax (4.5% for nephews and nieces, 12% for siblings, 15% for unrelated heirs) applies to the nephew's share, even though the deceased never set foot in Pennsylvania and the money came from a Texas account.
Out-of-state real estate creates a second trap. If a Conroe family owns a vacation cabin in Colorado or a condo in Massachusetts, that property gets pulled into the other state's probate when the owner dies. About a dozen states still impose their own estate tax on in-state real estate held by out-of-state owners.
The fix is usually structural: hold the out-of-state property in a Limited Liability Company (LLC) or in a living trust. That avoids ancillary probate and reduces or eliminates the foreign state's tax exposure. It's one of the most common planning moves we make for Lake Conroe families with second homes outside Texas.
What Counts as a "Taxable Estate" in Texas
The federal gross estate is broader than most people expect. Texans often think the homestead is "protected," and it is, from creditors during life. But it counts in the federal estate calculation at death at full market value.
The federal gross estate includes real property (primary home, vacation property, rental units, undeveloped land), financial accounts (bank, brokerage, money market, certificates of deposit), retirement accounts (Individual Retirement Accounts, 401(k)s, 403(b)s, pension lump sums), and business interests (closely-held company stock, partnership interests, professional practices).
It also includes life insurance the deceased owned, or had "incidents of ownership" in within three years of death. That's a common surprise. The fix is an Irrevocable Life Insurance Trust (ILIT), which removes the policy from the estate when it's set up correctly.
Certain gifts made in the last three years get clawed back into the estate. Annual exclusion gifts up to $19,000 per recipient (the 2026 limit) are safe.
Texas community property law affects how the estate splits between spouses but doesn't change the federal calculation. One thing it does change: both halves of community property get a step-up in basis at the first spouse's death. That federal benefit is unique to community property states, and for families holding decades of appreciated stock or real estate, it's a major Texas advantage worth planning around.
2026 Updates and What's Changing
The federal estate tax exemption is now permanent at the elevated level. Under the One Big Beautiful Bill Act (signed July 2025), the previously scheduled 2026 sunset was canceled. The exemption stays at the higher amount and continues to index for inflation. Families who built their plan around a "race to gift before sunset" deadline can revisit that strategy.
The annual gift tax exclusion rose to $19,000 per recipient for 2026. A married Texas couple can together gift $38,000 to each child, grandchild, or anyone else every year, without filing a gift tax return. For families with means, systematic annual gifting still moves real money out of the estate over time.
What hasn't changed: Texas still has no state estate or inheritance tax. There's no movement in Austin to introduce one. The double step-up in basis on community property at the first spouse's death is intact.
What This Means for Your Texas Estate Plan
For most Texas families, the estate-tax answer is short. You don't owe state tax, you're well below the federal threshold, and your plan should focus on probate avoidance, guardianship for minor children, and clean transfer of the homestead and retirement accounts.
For families with larger estates, business interests, out-of-state property, or out-of-state heirs, the planning gets more involved. Trusts, LLCs, Transfer on Death Deeds, and Irrevocable Life Insurance Trusts each handle different problems. The right structure depends on who your heirs are, where they live, what the estate holds, and what you want to happen.
If you're not sure where you stand, that's the conversation to have first. We'll walk through the actual numbers in your situation and tell you whether you're in the simple-plan group or the complex-plan group. There's no benefit to over-engineering. There's real cost to under-planning.