Tax on Inheritance in Ohio

Ohio is one of the more inheritance-friendly states.

For deaths occurring after January 1, 2013, Ohio does not impose a state inheritance tax or a state estate tax.

That means beneficiaries generally receive inherited property without owing Ohio state tax on the value of what they receive.

However, while Ohio doesn’t tax inheritances, federal tax rules can still apply, especially when inherited assets earn income or are sold.

Key Points at a Glance

• No Ohio inheritance tax
• No Ohio estate tax
• Federal estate tax applies only to very large estates
• Federal income or capital gains tax may apply after inheritance
• Inherited IRAs follow special federal rules

No Ohio State Inheritance or Estate Tax

What This Means for Heirs

• Ohio fully repealed its estate tax in 2013
• Beneficiaries do not pay Ohio tax for receiving:
  • Cash
  • Real estate
  • Investments
  • Retirement accounts

📌 Example:
If you inherit $500,000 or a home from a relative who lived in Ohio, Ohio will not tax you for receiving it.

Federal Estate Tax: Only for Very Large Estates

While Ohio has no estate tax, the federal estate tax still exists.

Who It Affects

• Applies only to estates exceeding the federal exemption
• For 2025, the exemption is approximately $13.99 million per person
• Married couples may effectively shelter nearly double that amount with proper planning

Who Pays

• The estate, not the beneficiary
• Taxes are paid before assets are distributed

Most families will never encounter the federal estate tax.

Federal Income and Capital Gains Taxes After You Inherit

Even though receiving an inheritance is not taxable income, taxes may apply later, depending on what you do with the assets.

Capital Gains Tax

If you sell inherited assets such as:

• Stocks
• Real estate
• Businesses

You may owe federal capital gains tax on any increase in value after the inheritance.

Stepped-Up Basis Advantage

Inherited assets usually receive a stepped-up basis, meaning:

• The asset’s value resets to its fair market value on the date of death
• This often reduces or eliminates capital gains tax

📌 Example:
A home worth $300,000 at inheritance is later sold for $320,000.

You typically pay capital gains tax only on the $20,000 gain, not on earlier appreciation.

Inherited IRAs: Special Federal Rules Apply

Inherited retirement accounts follow strict federal rules under the SECURE Act.

Most Non-Spouse Beneficiaries

• Must fully distribute the account within 10 years
• Withdrawals are usually subject to federal income tax
• No early withdrawal penalty, but taxes still apply

📌 Example:
If you inherit a traditional IRA, withdrawals are taxed as ordinary income when taken.

Roth IRAs are generally tax-free, but still subject to distribution timelines.

In Simple Terms

• Ohio won’t tax you for inheriting money or property
• Federal estate tax only affects extremely wealthy estates
• You may owe federal income or capital gains tax later, depending on:
  • Investment earnings
  • Asset sales
  • Retirement account withdrawals

Why Electronic Filing Is Recommended

Inheritance-related taxes often involve:

• Capital gains calculations
• Retirement account distributions
• Basis adjustments
• Multiple federal forms

Electronic filing (e-filing) makes this process far easier and more accurate.

Benefits of E-Filing

• Automatic capital gains and basis calculations
• Proper handling of inherited IRA income
• Built-in error checks
• Faster refunds
• Easier recordkeeping for future years

Tax software is especially helpful when selling inherited assets or managing required IRA distributions.

Bottom Line

• Ohio has no inheritance tax and no estate tax
• Most heirs receive assets tax-free at the state level
• Federal taxes may apply after inheritance, not when you receive it
• Inherited IRAs and asset sales require careful reporting
• Electronic filing helps ensure accuracy and reduces costly mistakes