Inheriting from a brother or sister in New Jersey can cost up to 16% in taxes: who pays and who doesn’t

Dealing with an inheritance in the United States often means navigating a complex mix of rules at the same time families are coping with a loss. From wills and probate to estate taxes and state inheritance taxes, the process of passing assets from a deceased person to their heirs and beneficiaries varies widely from state to state.

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For many families near New York City, one of the biggest surprises comes from New Jersey’s laws. The state is one of only five that still charge an inheritance tax paid by the heir who receives the money or property.

The state eliminated its estate tax back in 2018, but the inheritance tax is still in effect. Contrary to what people may assume, brothers and sisters are not exempt.

How much do siblings pay for inheriting in New Jersey

Brothers and sisters, along with sons-in-law and daughters-in-law, are “Class C” beneficiaries. The first $25,000 is tax-free. After that, the rates are:

• 11% on the next $1,075,000.
• 13% on the next $300,000.
• 14% on the next $300,000.
• 16% on anything above $1.7 million.

Therefore, a sibling who inherits $100,000 pays nothing on the first $25,000, but then the remaining $75,000 comes with a tax bill of $8,250.

Nieces, nephews, and friends have to pay even more on their inheritance

Nieces, nephews, cousins, and friends fall into “Class D.” Therefore, they pay 15% on the first $700,000 and 16% on anything above that.

Class D heirs don’t have a $25,000 exemption, but if they receive less than $500, no tax is due.

Who can inherit in New Jersey without paying

According to the New Jersey Division of Taxation, “Class A” beneficiaries pay nothing, no matter how much they inherit.

This group includes:

• Spouses, civil union partners, and domestic partners.
• Children, stepchildren, grandchildren, and great-grandchildren.
• Parents and grandparents.

Inheritances left to charities, religious institutions, and schools are also exempt.

Because each case is different, families who plan to leave money to siblings or other relatives should consult an estate planning attorney in advance.