Estate Tax & Inheritance Tax in Texas
Every few years someone asks whether Texas is going to tax their estate, or whether their kids will owe something on what they inherit. The short answer is that Texas doesn't tax either one — the state has no estate tax and no inheritance tax of its own. The longer answer is that "Texas doesn't tax it" and "nobody taxes it" are two different statements, because the federal government runs its own estate and gift tax system on top of whatever a state does, and that federal layer doesn't care what state you live in.
This page walks through what's actually federal, what's actually Texas-specific, and where a revocable trust does and doesn't help. For the broader Texas estate-planning picture — wills, powers of attorney, and beneficiary designations — see our Estate Planning Checklist. For what it takes to get a trust actually built and holding assets once you've decided you want one, see Funding a Trust.
Does Texas Have Its Own Estate or Inheritance Tax?
No, on both counts, and Texas got there in two different ways. Texas's estate tax used to exist only as a pick-up tax — a state-level tax equal to the state death tax credit the IRS allowed against the federal estate tax, so it cost an estate nothing extra; the state simply collected a credit the federal government would otherwise have kept. When Congress phased out that credit between 2002 and 2005, Texas's pick-up tax went to zero along with it and has stayed there since, with no need for the state to pass new legislation.
Texas's inheritance tax took a more direct path: the Legislature repealed it outright. Tax Code Chapter 211, the statute that had authorized a Texas inheritance tax, was repealed effective September 1, 2015, under Senate Bill 752 of the 84th Legislature, which also updated a cross-reference in Estates Code Section 124.001(3). Texas has no state gift tax either, consistent with having no state income tax framework to attach one to.
The Federal Estate Tax — What Actually Reaches a Texas Estate
The federal estate tax is the one that still matters, and it applies to a Texas estate exactly the way it applies everywhere else — where the decedent lived doesn't create or remove this liability the way it can with a state-level tax. Under Internal Revenue Code Section 2001, the tax is imposed on the transfer of a decedent's taxable estate, but Section 2010's unified credit — usually described by its dollar equivalent, the basic exclusion amount — shields most estates from ever owing anything. For decedents who die in 2026, the IRS has set that basic exclusion amount at $15,000,000 per individual, or $30,000,000 for a married couple who elects portability, up from $13,990,000 in 2025. That jump isn't a routine inflation adjustment: the One Big Beautiful Bill Act, signed July 4, 2025, permanently replaced the smaller Tax Cuts and Jobs Act exclusion — which had been scheduled to roughly halve at the end of 2025 — with this higher, inflation-indexed amount going forward. Above the exclusion, the tax is assessed on a graduated schedule that tops out at a 40% marginal rate.
Texas's community-property system does interact with the federal estate tax in one way worth knowing about, even though it isn't a tax itself. Under Internal Revenue Code Section 1014(b)(6), both halves of a married couple's community property get a full step-up in income-tax basis to fair market value when the first spouse dies — not just the half that belonged to the deceased spouse, which is all a separate-property state would step up. That can eliminate most or all of the built-in capital gains on appreciated community assets, and it's one of the more valuable, least-discussed features of dying with an estate in Texas.
Estate Tax vs. Inheritance Tax — Why the Distinction Still Matters Here
The two taxes are structured differently even though they get used interchangeably in conversation. An estate tax is assessed against the estate itself, before anything is distributed, and one return covers the whole estate regardless of how many people inherit from it. An inheritance tax, where it exists, is assessed against each heir individually, on the value of what that specific person received — a surviving spouse and a distant cousin can face completely different rates on money from the same estate. Texas has neither today, but the distinction isn't purely academic for a Texas resident: if you inherit from someone who was domiciled in one of the handful of states that still impose an inheritance tax, that state's law can reach you based on where they lived, not where you live.
Lifetime Gifts and the Gift Tax
The federal government taxes large gifts for the same reason it taxes large estates — without a gift tax, the estate tax would be trivial to avoid by simply giving everything away before death. The gift tax, imposed under Internal Revenue Code Section 2501, shares its unified credit with the estate tax under Section 2010, so lifetime gifts that use up part of the exclusion reduce what's left to shelter the estate later. Most day-to-day gifts never touch that shared exclusion at all: the annual exclusion under Section 2503(b) lets you give up to $19,000 per recipient in 2026, to as many people as you want, with no gift tax return required and no effect on your lifetime exclusion. A married couple can combine their annual exclusions to give $38,000 per recipient.
Beyond the annual exclusion, Section 2503(e) excludes tuition and medical expenses entirely, with no dollar cap, as long as you pay the school or the medical provider directly rather than handing the money to the person you're helping. Gifts to a spouse are unlimited under the marital deduction, and gifts to qualified charities are excluded as well. None of this changes for a Texas resident; the entire gift-tax analysis is federal, the same way the estate-tax analysis is.
Does a Revocable Living Trust Reduce Estate Tax?
This is the most common misconception in estate planning, and it isn't unique to Texas: no, a revocable living trust does not reduce or avoid federal estate tax. The reason is built into the trust's main selling point. Under Internal Revenue Code Section 2038, property you transferred into a trust is pulled back into your taxable gross estate if you kept the power to alter, amend, revoke, or terminate that transfer — which is exactly the power a revocable trust is built to give you. Section 2036 reaches a similar result for property where you kept the right to the income or the use of it. A trust you can undo at will is, for estate-tax purposes, treated as if you still own the assets outright, because in every way that matters to the IRS, you do.
None of that makes a revocable trust a bad idea — it's just not a tax tool. What it actually does is let the assets titled in its name skip probate, keep the details of your estate out of the public probate record, and give a successor trustee immediate authority to manage those assets if you become incapacitated, without a court proceeding. See Revocable Living Trust vs. Will for how a trust and a will divide up those jobs, and How a Trust Protects Your Assets for what a revocable trust protects against and what it doesn't — a trust that was never funded provides none of these benefits.
Trusts That Do Reduce Federal Estate Tax
Reducing the federal estate tax itself takes an irrevocable trust — one where you give up the control that triggered inclusion under Sections 2036 and 2038 in the first place. A few purpose-built versions come up often enough to name specifically. A Qualified Personal Residence Trust, built on an exception to Section 2702's gift-valuation rules, moves a home out of your estate at a discounted gift-tax value while you keep living in it for a fixed term. A charitable remainder trust, governed by Section 664, lets you transfer appreciated property into the trust, sell it inside the trust without immediate capital gains tax, draw an income stream for a term of years, and remove the remainder from your estate as a completed gift to charity.
An Irrevocable Life Insurance Trust addresses a different problem: life insurance proceeds are normally pulled into your gross estate under Section 2042 if you retained any incidents of ownership over the policy — the right to change the beneficiary, borrow against it, or cancel it. An ILIT owns the policy itself, outside your estate from the start, so the death benefit passes to your beneficiaries free of federal estate tax. None of these tools work any differently in Texas than anywhere else; the Internal Revenue Code doesn't have a Texas chapter, and Texas doesn't add a state-level exemption to plan around.
Why This Still Matters Even if You Don't Feel Estate-Tax Rich
Fifteen million dollars sounds like a number that only applies to someone else, and for most Texas households it does. But it adds up faster than people expect once you count a closely-held business at its full going-concern value, a portfolio of rental properties held through a Texas Real Estate Holding Company or an Texas Investment Holding Company, and life insurance owned outside a trust — all of which count toward your taxable estate at death even though none of it feels like estate-tax money while you're alive. A Texas Family Holding Company or an LLC for Estate Planning structure can make ownership easier to transfer across generations, but it doesn't shrink the number the IRS adds up at death — only the trust strategies above do that. And because the $15 million figure is itself the product of a 2025 law change, it's worth having your attorney confirm the current number rather than working from whatever you remember reading.
Final Thoughts
Texas keeps the state-tax side of this simple: no estate tax, no inheritance tax, no gift tax. What's left is entirely a federal question, and federal exclusion amounts have moved before and will move again — the jump to $15 million at the start of 2026 is proof of how much a single piece of legislation can change the calculus. If your estate is anywhere near the exclusion amount, or you're not sure whether it is once a business and real estate holdings are counted, that's a conversation worth having with an estate planning attorney rather than settling for a number you read once.