Georgia Has No State Estate Tax
Georgia repealed its state estate tax effective July 1, 2014. Under O.C.G.A. § 48-12-1: “On and after July 1, 2014, there shall be no estate taxes levied by the state.” The Georgia Department of Revenue confirms this directly — no estate taxes, no inheritance tax, no filing required if no federal estate tax return is required.
Georgia’s former estate tax piggybacked on the federal credit for state death taxes. When the federal government phased out that credit between 2002 and 2005, Georgia’s estate tax effectively became zero. The state codified the elimination in 2014. Georgia has not reinstated any form of state estate tax since.
Georgia also has no inheritance tax — the tax some states impose on beneficiaries who receive an inheritance. Beneficiaries who inherit rental properties from a Georgia estate owe no Georgia tax on the receipt of that inheritance. Georgia has no state gift tax either. The complete Georgia tax picture for inherited rental properties: zero state taxes at death.
The Federal Estate Tax — Who Actually Pays It
The federal estate tax applies only to estates that exceed the applicable exclusion amount. For 2025, that amount is $13.99 million per individual (Rev. Proc. 2024-40). Starting January 1, 2026, the One Big Beautiful Bill Act (H.R. 1, P.L. 119-21, signed July 4, 2025) permanently raised the exemption to $15 million per individual with no sunset provision. Inflation indexing begins in 2027.
Married couples can combine their exemptions using portability. If the first spouse to die does not use their full exemption, the surviving spouse can add it to their own. A married couple can pass $30 million to heirs free of federal estate tax using portability under current law.
The practical result: the vast majority of Georgia real estate investors will never owe a dollar of federal estate tax. The federal estate tax affects fewer than 0.2% of all estates in the United States. A Georgia investor with a rental portfolio worth $3 million, $5 million, or even $10 million is well below the exemption. The estate tax concern is real only for investors approaching $15 million in total estate value — and even then, planning strategies are available to manage exposure. For context on the cost of estate planning that addresses this, see How Much Does Estate Planning Cost for a Georgia Real Estate Investor.
How Rental Properties Are Valued for Federal Estate Tax
If your estate does approach the federal threshold, your rental properties will be valued at fair market value at the date of your death — not at the depreciated book value on your tax return, and not at your original purchase price.
A property you bought for $200,000 twenty years ago, depreciated down to $80,000 on your books, and now worth $850,000 on the open market is valued at $850,000 for estate tax purposes. The entire current market value is counted against your exemption. Depreciation taken during your lifetime does not reduce the estate tax value — it only affects your income tax basis during ownership.
If rental properties are held inside an LLC or partnership, the estate may be entitled to a minority interest discount if the decedent held less than a controlling interest. These discounts can meaningfully reduce the estate tax value of large portfolios held through entity structures — but they require a qualified appraiser and specific circumstances to apply.
The Step-Up in Basis — The Tax Benefit Most Investors Miss
Even when no estate tax is owed, there is a significant tax benefit at death: the step-up in basis under IRC § 1014. When your heirs inherit a rental property, their cost basis for future capital gains purposes is reset to the property’s fair market value on the date of your death.
What this means in practice: if you bought a property for $200,000 and it is worth $800,000 at your death, your heir’s basis is $800,000. If they sell it the next day for $800,000, they owe zero capital gains tax. Every dollar of appreciation that occurred during your ownership is eliminated. The step-up wipes out embedded gains that would otherwise have been taxed if you had sold the property during your lifetime.
The step-up in basis is not automatic for all trust structures. The distinction is important:
- Revocable living trust: Assets are included in your gross estate at death under IRC § 2038 (retained power to revoke). Because they are in the estate, the step-up applies. Your heirs get the full basis reset. This is why a revocable trust is the right tool for most Georgia investors — it avoids probate AND preserves the step-up.
- Irrevocable grantor trust (IDGT) designed to remove assets from your taxable estate: IRS Rev. Rul. 2023-2 (March 29, 2023) holds that assets excluded from the gross estate do NOT receive a step-up in basis. Your heirs take carryover basis under IRC § 1015 instead — meaning they inherit your original cost basis, not the date-of-death value. If you transferred a $200,000-basis property into an irrevocable trust and it is worth $800,000 at your death, your heir’s basis remains $200,000. They owe capital gains on the full $600,000 gain when they sell.
The Rev. Rul. 2023-2 trade-off: an IDGT removes assets from the gross estate but sacrifices the step-up in basis. For most Georgia investors whose estates are well below the $15 million federal exemption, this trade is unfavorable — they gain no estate tax benefit but lose the step-up. The right tool for most investors is a revocable trust. For a direct comparison, see Revocable Trust vs. Irrevocable Trust for Georgia Rental Properties.
Georgia Transfer Tax at Death
Georgia’s real estate transfer tax (O.C.G.A. § 48-6-2) applies to sale transactions where title transfers from seller to buyer. The rate is $1 per first $1,000 of consideration plus $0.10 per each additional $100.
Inheritance transfers are explicitly exempt. O.C.G.A. § 48-6-2(a)(9) exempts “any deed of assent or distribution by an executor, administrator, guardian, trustee, or custodian” — provided the transfer is without valuable consideration. When rental properties transfer from an estate to heirs through a deed of assent, or from a trust to beneficiaries through a trustee’s deed, no Georgia transfer tax applies.
When you fund a revocable trust during your lifetime by deeding rental properties into the trust, no transfer tax applies either — the transfer is to a revocable trust you control, not a sale. At death, the transfer from trust to beneficiary also carries no transfer tax. For the procedural details on lifetime transfers, see How to Deed Rental Properties Into a Revocable Trust in Georgia.
The Tax That Actually Matters — Capital Gains After Inheritance
Estate tax and inheritance tax are not the primary tax concern for most Georgia investors’ heirs. The tax that matters is capital gains when heirs eventually sell an inherited property.
The step-up in basis eliminates gains that accumulated during the decedent’s ownership. What it does not eliminate is appreciation that occurs after the heir inherits. If a property is worth $800,000 at the date of death and the heir sells it five years later for $950,000, they owe capital gains tax on $150,000 — not on the full gain from the original purchase price.
Federal long-term capital gains tax rates are 0%, 15%, or 20% depending on the heir’s income. The depreciation recapture rules under IRC § 1250 also apply: depreciation taken during the decedent’s ownership does not reduce the heir’s step-up basis, but future depreciation on the inherited basis creates its own recapture exposure at sale.
The practical conclusion: the step-up in basis dramatically reduces the heir’s capital gains exposure compared to a lifetime sale. A revocable trust preserves the step-up. An irrevocable trust may eliminate it. For most Georgia investors whose estates are under $15 million, the revocable trust is the correct tool — it avoids probate, activates the successor trustee during incapacity, and preserves the full step-up benefit for heirs. See Best Way to Pass Rental Properties to Your Children in Georgia for a full comparison of transfer methods and their tax consequences.
