To further understand the difference between the two, an inheritance tax is an assessment made on the portion of an estate received by an individual. Eleven states still collect an inheritance tax including Connecticut, Indiana, Iowa, Kansas, Kentucky, Maryland, Nebraska, New Jersey, Oregon, Pennsylvania, and Tennessee. An inheritance tax is different from an estate tax, which is a tax levied on an entire estate before it is distributed to individuals. If you were to inherit a home worth, say $3 million, the federal estate tax would be $450,000. If you decide to sell the inherited home, you will probably be required to pay capital gains tax on the difference between what you net from the sale and your basis, which is the purchase price plus improvements minus depreciation.
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