New Jersey Inheritance Tax: Rates and Exemptions

In New Jersey, your spouse and your children inherit from you free of inheritance tax, and a step-child or a legally adopted child counts as your child.1 Your brother, your niece, and your daughter's husband fall outside that fully exempt class and can owe New Jersey inheritance tax.1

The state repealed its estate tax for deaths on or after January 1, 2018, but kept its inheritance tax, and who pays it depends first on how they were related to the person who died.1 This guide walks through who owes the New Jersey inheritance tax, who walks away clear, and what the rates run for everyone in between.

In This Guide

• New Jersey Inheritance Tax at a Glance
• Inheritance Tax vs. Estate Tax
• How the New Jersey Inheritance Tax Works
• The Beneficiary Classes
• What About Medicaid Estate Recovery?
• Frequently Asked Questions
• Next Steps

New Jersey Inheritance Tax at a Glance

Here is the short version. New Jersey does not tax your estate. It taxes certain people who inherit from you, and the rate depends entirely on their relationship to you.

If everything you leave goes to a spouse or civil-union partner, your children, or your grandchildren, no inheritance tax is due at all, and New Jersey counts a legally adopted child and a step-child among your children.1 Parents and grandparents are in the same exempt class. The tax only shows up when money or property passes to someone outside that class, such as a brother or sister, a child's spouse, a niece or nephew, or a friend.1

That is the whole logic of the New Jersey inheritance tax: the closer the relationship, the lower the bill, and for the closest relatives there is no bill at all.

Inheritance Tax vs. Estate Tax

These two get mixed up constantly, and the difference matters for who actually pays.

The federal estate tax is figured on the total of what the person who died transferred at death and through taxable gifts during life, and it is filed on IRS Form 706.2 An inheritance tax is different: it is paid by the heir, and what triggers it is the heir's relationship to the person who died.1 Two people inheriting equal amounts from the same estate can owe completely different tax, because one was a daughter and the other was a cousin.

New Jersey once had both. It repealed the estate tax for deaths on or after January 1, 2018, and kept the inheritance tax.1

The federal estate tax is separate from any state estate or inheritance tax, New Jersey's included.2 For deaths in 2026 the federal basic exclusion amount is $15,000,000 per decedent, and taxable gifts made during life count against it along with what passes at death.2 Being under that exclusion does not mean no death tax is owed: a state inheritance tax like New Jersey's can fall on an estate that owes nothing federally.2

How the New Jersey Inheritance Tax Works

The tax sorts every beneficiary into a class, and the class sets the rate. New Jersey's inheritance tax recognizes five beneficiary classes in all, and it applies to transfers of real and personal property worth $500 or more.1

Class A is the closest family, and it is fully exempt. Class C is brothers and sisters and a child's spouse. Class D is every other transferee or beneficiary who is not in Class A, Class C, or Class E, which in practice means more distant relatives and unrelated heirs. Class E is the institutional class, and it gets its own section below.1 Class C gets a $25,000 exemption before any tax kicks in, then pays a graduated rate that climbs from 11 percent to 16 percent as the inheritance gets larger. Class D has no general exemption: it pays 15 percent on the first $700,000 and 16 percent on anything above $700,000.1 There is no Class B: it was eliminated by statute effective July 1, 1963.1

The person who inherits is the one the tax falls on, but the filing is the estate's job.1 The executor, administrator, or heir-at-law must file the New Jersey Inheritance Tax return, if one is required, within eight months of the date of death, and any tax due on the transfer of taxable real or personal property must be paid inside that same eight-month window.3 Tax that is not paid within eight months of the date of death accrues interest at 10 percent a year.3 The statute, R.S.54:35-3, charges only 6 percent a year while claims against the estate, necessary litigation, or another unavoidable delay keep the estate from being settled.3 Form IT-EXT extends the time to file the return, but there is no extension of time to pay, and interest still runs on any unpaid tax.3 A resident's estate files Form IT-R, and it files on paper: New Jersey does not offer electronic filing for inheritance and estate tax returns.3 The forms and the filing requirements come from the New Jersey Division of Taxation, which also publishes the class rate schedule.

Getting at the money does not always mean waiting for the full waiver. The Division's waiver, Form 0-1, releases the state's tax lien so property can be transferred, and it issues only after a return (or Form L-9 or L-9NR) is filed and all tax due is paid.3 When bank accounts, stocks, bonds, or brokerage accounts go to a Class A beneficiary, Form L-8, a self-executing waiver filed directly with each bank, broker, or transfer agent, can be used in most cases instead, though never for real estate.3 Under the Blanket Waiver, a bank may release up to 50 percent of the funds on hand to the estate representative or a joint owner at any time, holding the rest until it receives a valid waiver or Form L-8.3

The Beneficiary Classes

Class C's rate is not a flat 11 percent. It steps up through four brackets after the exemption.1

A few things worth pulling out of those tables.

Class A pays nothing, and it is wider than most people assume. A surviving spouse or civil-union partner, a child, a legally adopted child, a step-child, grandchildren and other lineal descendants, a mother or father, and grandparents all inherit free of New Jersey inheritance tax.1 If you are a step-child or an adopted child of the person who died, you are in the same exempt class as a biological child and you owe New Jersey nothing on your inheritance.1

The one trap in Class A: a step-child is in, but a step-child's descendants are not. New Jersey's own instructions say it outright: the issue of a step-child, meaning that step-child's children and their descendants, are Class D beneficiaries and not Class A.1 So a step-child inherits tax-free, while that step-child's own child inherits at the Class D rate with no general exemption, even though the issue of a biological or legally adopted child would be Class A.1 If a will leaves money to the children of a step-child, price it as Class D.

Class C is a narrow list, not "in-laws" in general. It is a brother or sister of the person who died, including a half-brother or half-sister, plus the wife or widow of a son and the husband or widower of a daughter.1 They get the first $25,000 tax-free, then 11 percent on the next $1,075,000, 13 percent on the next $300,000, 14 percent on the next $300,000, and 16 percent on anything above $1,700,000.1 A sibling who inherits $25,000 or less owes no New Jersey inheritance tax, and the 11 percent rate starts only on the amount above $25,000.1 A brother-in-law or sister-in-law of the deceased is not on that list.

Class D is the more distant heirs. Nieces, nephews, cousins, friends, and unrelated heirs get no general exemption, and the rate is 15 percent on the first $700,000 and 16 percent on anything above $700,000.1

Class E is for institutions, not people. Class E covers the State of New Jersey and its political subdivisions, along with qualifying educational, religious, charitable, benevolent, scientific, and literary institutions.1 The Division of Taxation's instructions describe transfers to these bodies as carrying an exemption, and they add a limit: that exemption does not extend to like institutions of other states that do not grant an equal and like exemption to New Jersey's own. The Division's rate schedule itself sets rates for Class A, Class C, and Class D only.1 So if a bequest goes to an organization rather than to a person, confirm its treatment with the New Jersey Division of Taxation rather than assuming the Class D rate applies.

This is why relationship comes first in the New Jersey inheritance tax. An identical bequest to a daughter is tax-free; to a friend, it is taxed at 15 percent on the first $700,000 and 16 percent above that, with no general exemption.1

What About Medicaid Estate Recovery?

This is a separate process people often confuse with the inheritance tax, so it is worth drawing the line clearly.

If the person who died received Medicaid services on or after age 55, New Jersey's Division of Medical Assistance and Health Services (DMAHS) may file a claim and lien against the estate to recover those payments, and not only payments for long-term care.4 That is Medicaid estate recovery, and it is not a tax. New Jersey counts the estate broadly for recovery, including a home or a share of one and bank accounts, even when the property passes to a survivor, so it can shrink what heirs receive.4

The two can both touch the same estate, but they are unrelated. The inheritance tax depends on who the heirs are; estate recovery depends on the Medicaid services the person received from age 55 on.4 If you are sorting out an estate where the person was on Medicaid, treat them as two different questions.

Next Steps

If you are planning ahead, the takeaway is simple: leaving assets to a spouse, to your children (a step-child and a legally adopted child included), or to grandchildren keeps the New Jersey inheritance tax out of the picture. Leaving them to a brother or sister, to a child's spouse, to a niece or nephew, or to a friend invites it.1

• Map your beneficiaries to their class. Check each name against the class table above; anyone who lands in Class C or Class D can owe tax, and it is better to know before, not after.
• Coordinate with the estate plan. A New Jersey estate attorney can map each beneficiary to a class and model the bill.
• Separate the tax from estate recovery. If Medicaid was involved, handle that claim on its own track.

For families weighing how an inheritance fits into paying for a parent's care, our guides on building a senior care funding plan and selling or renting a home for care walk through the money side in plain terms.

Learn More

Find personalized help understanding how an inheritance affects your family's care plan at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.