Indiana State Inheritance Tax Laws

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Indiana is one of the few states that imposes an inheritance tax. An inheritance tax is a tax paid by the individual receiving the assets of the estate (i.e., the heir), not the deceased's estate. Your relationship with the deceased and the amount you receive determines the amount of inheritance tax you pay.

Residence at Death

According to Monroe Bank, if the deceased is a resident or owns property in Indiana at the time of death, the heirs may be taxed.

Life Insurance

According to the Indiana Administrative Code, life insurance is exempt from taxation if a person is beneficiary. If, however, the beneficiary is the deceased's estate then life insurance is subject to the inheritance tax.

Spouses and Charities

The Indiana Administrative Code states that spouses and charities are totally exempt from the Indiana inheritance tax without exception.

Other Exemptions

According to the Indiana Administrative Code, lineal ancestors (parents and grandparents) and lineal descendants (children and grandchildren) do not have to pay taxes on the first $100,000. Brothers, sisters, nieces, and nephews receive a $500 exemption, while friends and distant relatives receive $100.

Tax Rate

The Indiana inheritance tax is between one percent and ten percent on the amount remaining after exemptions, depending on the amount inherited and the relation of the heir to the deceased. For a list of tax rates, see the Indiana Inheritance Tax Guide in the resources section.