Pennsylvania imposes an inheritance tax on persons who inherit property from persons who are not closely related to them. The tax rate is dependent on their familial relationship. However, some exceptions may apply.
-
A resident of Pennsylvania; or
-
A person who owns real or tangible property in Pennsylvania.
Exemptions for Farms and Businesses
-
be left to family members,
-
produce at least $2,000 yearly gross income,
-
continue to be used for agricultural purposes for seven years.
-
Be wholly owned by the decedent and his/her family,
-
be left to family members and stay in operation for seven years,
-
have been in existence five years prior to the death of the decedent,
-
have less than 50 employees,
-
have less than $5 million in assets,
-
the principal purpose of the business cannot be management of income producing assets.
Tax Rates
-
Surviving spouse
-
Parents who inherit from children who were 21 or younger at the time of death
-
Charitable organizations and government entities
-
Lineal descendants (i.e. children, grandchildren, great grandchildren, etc.)
-
Parents and grandparents
-
Spouse of a child
-
Surviving spouse of a child, if the surviving spouse did not remarry
15% – All other inheritors pay a 15% tax rate.
When Is Tax Collected?
The executor of the estate must file a tax return for the decedent within 9 months of his death. Only one tax return is needed even if there are multiple people inheriting. The tax must be paid out of the decedent’s estate prior to distribution of the estate. If the tax is not filed within the 9 months deadline, then an extension may be filed and a penalty will be assessed.
Consulting an Attorney
If you are concerned with inheritance tax or would like to potentially reduce the amount owed, please consult a Pennsylvania estate lawyer. He will help you straighten out your affairs for your peace of mind and to lower your beneficiaries’ tax obligations.