UpTrajectory Review

The Tax Foundation's annual state-by-state estate and inheritance tax map is out for 2026, and the headline numbers are familiar: on top of the federal estate tax with its 40 percent top marginal rate, 12 states plus the District of Columbia impose their own estate taxes, while five states levy inheritance taxes. A handful of states do both. The piece is essentially a reference table — thresholds, rates, exemptions, and the distinction between an estate tax (levied on the deceased's assets) and an inheritance tax (levied on the beneficiary, often with exemptions based on the relationship to the decedent).

For a small-business owner, this is not an abstract map. If you own a company, a building, or even a valuable client list, your estate may be worth far more than you think once illiquid assets are counted. The federal exemption is high enough that most owners won't owe federal tax, but state thresholds are often dramatically lower — some states kick in at estates worth a few million dollars, which a successful Main Street business can easily exceed. That means your heirs could face a tax bill on paper wealth they cannot easily convert to cash.

What is genuinely useful in this piece is the state-by-state granularity. The Tax Foundation has long argued that estate and inheritance taxes are poor economic policy — they drive wealthy residents and their capital to lower-tax states, and the revenue raised is often modest. We agree with that framing, but we'd add a caveat the piece underplays: for owners who cannot or will not relocate, the planning burden is real and the compliance costs fall hardest on businesses without sophisticated advisors. The map also shows how uneven the landscape is — neighboring states can treat the same estate very differently.

The second-order effects matter for communities, not just families. When a longtime owner dies and the estate tax comes due, the business itself is often the most liquid asset available to pay it. That can force a rushed sale, a leveraged buyout by outside investors, or a closure — outcomes that cost local jobs and strip a community of an institution. States with inheritance taxes add another wrinkle: beneficiaries who are not close relatives may face rates high enough to make accepting the asset uneconomical, which can scramble succession plans that took decades to build.

If you own a business and haven't looked at your state's rules recently, this is the moment. Exemption thresholds change, and several states have been adjusting theirs upward or downward in recent years. Watch whether your state appears in the piece's tables, and compare it against where your beneficiaries live — inheritance tax exposure can depend on the recipient's state of residence, not just yours. Talk to an estate attorney or CPA who understands business valuation, and consider whether tools like gifting, trusts, or life insurance can cover a potential liability.

The broader trend to watch is whether more states follow the path of repeal. The Tax Foundation has documented a steady march of states eliminating these taxes over the past two decades, and the 2026 map will show whether that momentum continues or stalls. For now, the patchwork persists — and for business owners, ignoring it is a choice with consequences.

“In addition to the federal estate tax, which has a top marginal rate of 40 percent, 12 states and the District of Columbia impose estate taxes, while five states levy inheritance taxes.” — Tax Foundation

Takeaway: Check your state's estate or inheritance tax threshold now — a business worth a few million can trigger a tax your heirs may have to pay in cash.