Does Texas Have an Inheritance Tax?

by Rania Combs on March 1, 2011

The short answer to the question is no. Before 1995, Texas collected a separate inheritance tax, called a “pick-up tax.” The tax did not increase the total amount of estate tax paid upon death. Rather, a portion of the federal estate tax, equal to the allowable state death tax credit on the federal estate tax return, was deducted from amount due to the federal government and paid to Texas.

However, under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the state death tax credit was phased out starting on January 1, 2005. In response, some states changed their laws to “decouple” from federal system and imposed their own inheritance taxes to compensate for the decline in revenue. Texas did not decouple.

The federal estate tax and the pick-up tax were scheduled to return on January 1, 2011 with the expiration of EGTRRA. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 , which repealed EGTRRA, did not reinstate the pick-up tax. As a result, no state inheritance tax is due on estates with a date of death on or after January 1, 2005.

The new law is scheduled to expire on December 31, 2012. If no new law is passed, the pick-up tax, and the state inheritance tax, will return on January 1, 2013.

For more information, visit the Texas Comptroller of Public Accounts website.

Return to Texas Wills and Trust Online home page →

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