New Jersey Inheritance Tax: Rates and Beneficiary Classes

New Jersey is one of the few states that still charges an inheritance tax, and it sits at the center of estate planning in New Jersey. Who pays and how much turns almost entirely on one question: how the person receiving the money was related to the person who died. This article covers the four beneficiary classes, the current rate schedule, which transfers are exempt, and how the return is filed.

How New Jersey’s inheritance tax works

New Jersey’s inheritance tax applies to property that passes from a deceased resident to a beneficiary, with the rate set by the beneficiary’s relationship to the decedent and the value that beneficiary receives. The tax is imposed under N.J.S.A. 54:34-2. It is not based on the total size of the estate, so two people who inherit the same dollar amount can owe very different tax depending on their class.

That structure is what separates an inheritance tax from an estate tax. An estate tax is charged to the estate as a whole before assets are distributed; an inheritance tax is charged to each beneficiary based on what they receive. New Jersey used to have both. No New Jersey estate tax is imposed on the estates of people who die on or after January 1, 2018, according to the New Jersey Division of Taxation. The federal estate tax is separate and applies only to very large estates under IRS rules; it has nothing to do with New Jersey’s inheritance tax.

The beneficiary classes

New Jersey sorts every beneficiary into a class defined by their relationship to the decedent. The class controls both the exemption and the rate. The Division of Taxation’s definitions and the rate statute set out who falls where.

• Class A, fully exempt. Spouses, civil union partners, and domestic partners; parents and grandparents; children, including legally adopted children, stepchildren, and a mutually acknowledged child; and grandchildren and other lineal descendants. Class A beneficiaries pay no New Jersey inheritance tax.
• Class C, partial exemption, then graduated rates. A brother or sister of the decedent, and the spouse or surviving spouse of the decedent’s child (a son-in-law or daughter-in-law). The first $25,000 passes tax-free, then graduated rates apply under N.J.S.A. 54:34-2(c).
• Class D, taxed from the first dollar. Every beneficiary who does not fall into Class A, C, or E, including nieces, nephews, cousins, friends, and unmarried partners who are not registered domestic or civil union partners.
• Class E, fully exempt. The State of New Jersey and its political subdivisions, plus qualifying charitable, religious, educational, hospital, and similar organizations.

There is no longer a Class B. It was removed from the statute by amendment years ago, which is why New Jersey’s rate schedule runs A, C, D, and E with no B in between.

Inheritance tax rates by class

Class A and Class E beneficiaries owe nothing, so the rate schedule only matters for Class C and Class D. The brackets below are current as of 2026 and come from the New Jersey Division of Taxation rate table, which tracks N.J.S.A. 54:34-2.

For a Class C beneficiary (sibling, son-in-law, or daughter-in-law), the Division of Taxation rate table sets these brackets:

• First $25,000: no tax
• Next $1,075,000 (the amount from $25,000 up to $1,100,000): 11%
• Next $300,000 (up to $1,400,000): 13%
• Next $300,000 (up to $1,700,000): 14%
• Over $1,700,000: 16%

For a Class D beneficiary (everyone not in Class A, C, or E), the same rate table applies just two brackets:

• First $700,000: 15%
• Over $700,000: 16%

Because Class D has no exemption floor, a niece who inherits $50,000 owes 15% of the full amount, while a sibling who inherits the same $50,000 owes 11% only on the $25,000 above the Class C exemption set by N.J.S.A. 54:34-2. The relationship, not the dollar figure, drives the result.

Which transfers are exempt

Several categories of property escape the inheritance tax regardless of the beneficiary’s class. The largest exemptions are the classes themselves: any transfer to a Class A relative or a Class E organization is not taxed under N.J.S.A. 54:34-2.

Beyond class, life insurance proceeds paid to a specifically named beneficiary are not subject to New Jersey inheritance tax, a point the Division of Taxation treats as a standard exclusion. Certain retirement and pension benefits payable to a surviving spouse or other exempt beneficiary can also fall outside the tax. Property the decedent gave away more than three years before death is generally outside the tax as well, while gifts made within the three years before death may be pulled back in and taxed as transfers “in contemplation of death.”

Filing the return and paying the tax

For a New Jersey resident who died, the estate files Form IT-R, the Inheritance Tax Resident Return, when a return is required. Electronic filing is not available for inheritance and estate tax returns, so the return is filed on paper with the Division of Taxation.

The steps below outline how the tax is worked out for a given beneficiary.

1. Identify the beneficiary's class

   Match each beneficiary to Class A, C, D, or E based on their relationship to the decedent. Class A and Class E beneficiaries owe no tax; Class C and Class D beneficiaries move to the next step.

2. Apply the exemption

   Subtract any exemption that applies to the class. A Class C beneficiary subtracts the first $25,000. A Class D beneficiary has no exemption floor and is taxed from the first dollar.

3. Apply the rate to each bracket

   Run the remaining amount through that class’s rate schedule, 11% to 16% for Class C, 15% to 16% for Class D, bracket by bracket rather than at a single flat rate.

4. File Form IT-R and pay

   File the resident return and pay any tax due. Paying within eight months of death avoids interest charges on the balance.