Inherited crypto is taxed the same way as any other property when someone dies. There's no special crypto rule at the state level. What matters is where the person lived (and, for out-of-state real estate, where it sits), how large the whole estate is, and how closely each heir was related to the person who died.
Most families owe nothing. Federal estate tax only applies to estates above $15,000,000 for deaths in 2026, according to the IRS. The state taxes below start much lower, and a few of them tax heirs who aren't close family no matter how small the estate is.
This guide is general information as of October 2026, not tax advice. Thresholds change every year, so confirm the numbers with the state's tax department or an estate attorney before you file anything.
Estate tax vs. inheritance tax
| Estate tax | Inheritance tax | |
|---|---|---|
| Who pays | The estate, before anything is distributed | The heir, on what they receive (usually withheld by the executor) |
| What decides it | Total size of the estate | Relationship of the heir to the person who died |
| Spouse | Generally exempt (marital deduction) | Exempt in all five states |
| Children | Count toward the estate like everyone else | Exempt except in Pennsylvania (4.5%) and Nebraska (low rate) |
| Crypto valued at | Fair market value on the date of death | Fair market value on the date of death |
Neither one is the same as capital gains tax. Capital gains tax only comes up when the heir later sells, and it's measured from the date-of-death value. See taxes on inherited crypto and step-up basis.
States with an estate tax (2026)
Twelve states and the District of Columbia charge their own estate tax: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington and D.C.
Their thresholds range from about $1 million (Oregon) and $2 million (Massachusetts) up to more than $10 million in Connecticut. Top rates are mostly 12% to 16%, and Washington's is higher. Because these thresholds are so much lower than the federal one, a family can owe state estate tax even though no federal return is due. A house, a retirement account and a few bitcoin can be enough in Oregon or Massachusetts.
New York
New York's basic exclusion amount is $7,350,000 for deaths in 2026 ($7,160,000 for 2025), according to the New York State tax department. A resident's estate has to file a New York estate tax return if the federal gross estate plus certain gifts exceeds that amount.
New York also has a well-known "cliff": once the taxable estate goes more than 5% above the exclusion, the exclusion stops helping and the whole estate is taxed. So an estate a little over the line can owe far more than one just under it. If crypto prices move the estate close to the threshold, get professional advice early.
New York has no inheritance tax, so a search for "cryptocurrency inheritance tax New York" usually means the estate tax above.
States with an inheritance tax (2026)
Five states charge inheritance tax: Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. Maryland is the only state with both an estate tax and an inheritance tax. Iowa used to have one but phased it out, and it no longer applies to deaths from 2025 onward.
Pennsylvania
Pennsylvania taxes almost every heir except a spouse. The Pennsylvania Department of Revenue lists these rates:
| Heir | Rate |
|---|---|
| Surviving spouse, or a parent inheriting from a child aged 21 or younger | 0% |
| Direct descendants and lineal heirs (children, grandchildren) | 4.5% |
| Siblings | 12% |
| Other heirs | 15% |
| Charities, exempt institutions and government entities | Exempt |
The tax is due at death and becomes delinquent nine months after it. If it's paid within three months, Pennsylvania allows a 5% discount. Property owned jointly between spouses is exempt.
For crypto that is held on an exchange which takes months to release a death claim, that three-month window matters. The executor may need to pay the tax from other money and get reimbursed once the account is released.
New Jersey
New Jersey stopped charging estate tax for deaths on or after January 1, 2018, but its inheritance tax still applies. The New Jersey Division of Taxation groups heirs into classes:
| Class | Who (broadly) | Tax |
|---|---|---|
| A | Spouse or civil union/domestic partner, children, grandchildren, parents, grandparents | None |
| C | Siblings, sons- and daughters-in-law | First $25,000 exempt, then 11% on the next $1,075,000, rising to 16% above $1,700,000 |
| D | Everyone else, such as nieces, nephews and friends | 15% on the first $700,000, 16% above that |
Check the Division's own class definitions before relying on this: stepchildren, for example, are Class A, but step-grandchildren are not.
Kentucky, Maryland and Nebraska
- Kentucky exempts close family (spouse, parents, children, grandchildren and siblings). Nieces, nephews and more distant heirs pay tax on graduated scales.
- Maryland charges 10% inheritance tax, but spouses, descendants and certain close relatives are exempt. Larger estates can also owe Maryland estate tax.
- Nebraska's inheritance tax is collected by the county. Close relatives pay a low rate above an exemption, and more distant heirs pay higher rates.
Ask each state's revenue department for current forms and exemptions.
What this means for inherited crypto
- Record the date-of-death value now. Estate tax, inheritance tax and the heir's capital gains basis all start from the same number: each asset's fair market value on the date of death. Exchange statements for that date, plus a reputable price source for self-custody wallets, cover all three. Our step-up basis guide has a checklist.
- Lost or locked crypto still counts. If the recovery phrase is missing, the assets don't vanish for tax purposes. Tell the executor and the tax preparer what you know, and don't overstate or hide it. See how to find out if a deceased person had crypto.
- Price swings matter near a threshold. Crypto can move tens of percent between the date of death and the date the estate is settled. Tax is usually based on the date-of-death value, so a later crash doesn't reduce it automatically. Ask an adviser whether any alternate-valuation option applies.
- Who gets what changes the bill in inheritance-tax states. In Pennsylvania or New Jersey, leaving crypto to a sibling or a friend costs more than leaving it to a spouse or child. That's a planning question for the owner, best settled in a will or trust. See crypto in a will.
If you hold crypto today
- Note in your letter of instruction which state you consider home. Domicile decides which estate tax applies.
- Keep a digital asset inventory with rough values, so your executor can quickly tell whether the estate is near a threshold.
- If you live in a state with a low threshold, or plan to leave crypto to someone other than a spouse or child, talk to an estate planner.
Common questions
Is inherited crypto subject to inheritance tax?
Only if the person who died lived in Kentucky, Maryland, Nebraska, New Jersey or Pennsylvania (or owned property taxed there), and only for heirs who aren't exempt. Spouses are exempt in all five. There's no separate federal inheritance tax.
Does New York have an inheritance tax on crypto?
No. New York has an estate tax, paid by the estate, with a $7,350,000 exclusion for deaths in 2026. Crypto counts toward the estate at its date-of-death value.
Which states have both estate and inheritance tax?
Maryland is the only one in 2026.
Do I pay tax when I inherit bitcoin and then sell it?
Receiving it isn't income for federal purposes. When you sell, any gain is measured from the date-of-death value and treated as long-term. Details are in our step-up basis guide.
Can holding bitcoin avoid state estate or inheritance tax?
No. Crypto is property like any other and counts at its date-of-death value. What lowers these taxes is ordinary estate planning with an adviser, not the type of asset.