Pennsylvania Inheritance Tax - Frequently Asked Questions

Posted over 5 years ago. Applies to Pennsylvania, 43 helpful votes

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1

What is The Pennsylvania Inheritance Tax?

The inheritance tax is a tax on the assets owned or controlled by a decedent at the time of his or her death. The tax does not apply to life insurance on the decedent's life. It also applies to assets the decedent gifted within one year of the date of death. The tax rates are dependent on the relationship of the decedent to his or her beneficiaries. This inheritance tax return is due within 9 months after the date of death. A discount can be achieved for the portion of the tax paid within 3 months after date of death. A six month extension for the filing of the tax return is available during which interest will accrue against any unpaid portion of the tax ultimately due.

2

What are the Inheritance Tax Rates in Pennsylvania?

The tax rates depend on the relationship of the decedent to the individuals inheriting assets. The tax rates for beneficiaries and how they are related to the decedent are as follows: Spouse: 0% Charity 0% Child: 4.5% Parent: 4.5% Sibling: 12% Everyone Else: 15%.

3

How are Jointly Owned Assets Taxed for Inhertance Tax Purposes?

Fifty (50%) percent of the value of assets owned jointly by the decedent and one other person are subject to inheritance tax provided that the assets were owned jointly for at least one (1) year prior to the date of death. If the assets were owned jointly for less than one year before date of death, 100% of their value will be subject to tax. **There might be a $3000 gift exclusion that applies for assets owned jointly for less than one year. ** If additional individuals are joint owners then the fractional share considered to be owned by the decedent will be subject to the inheritance tax. ie. 3 joint owners= 1/3 taxable. 4 joint owners= 1/4 taxable etc.

4

Is Life Insurance Subject to PA Inheritance Tax?

The short answer is no. There is no inheritance tax on the payout from an insurance policy. ***This is just for PA Inheritance Tax!!! The Federal Government does include Life Insurance when calculating the value of an estate for Federal Estate Tax purposes.***

5

When Is The PA Inheritance Tax Return Filed and the Tax Paid?

The PA Inheritance Tax Return filing deadline is 9 months after the date of death. You can also apply for a 6 month extension during which interest will accrue on any unpaid portion of the tax ultimately due. A penalty will be applied for any tax paid after the extension period. Executors can be personally liable for penalties and interest so be very careful!! The executor can also pay an estimate of the tax within 3 months after the date of death and have 5% credit added onto the amount paid. Any remaining balance can be paid at the time the Inheritance Tax Return is filed. Any overpayment will be returned after the Inheritance Tax Return is filed.

6

Can The PA Inheritance Tax Return Be Filed Early?

Technically, the Inheritance Tax Return can be filed anytime after the date of death. That being said, the Executor/Administrator must be very careful that all assets, expenses and debts have been determined before filing the tax return. If assets, expenses or debts are later discovered the Executor/Administrator will have to file a supplemental tax return. This could cause additional expense and time delay for the estate. Again, personal liability could result for the Executor/Administrator of the estate.

Additional Resources

PA Inheritance Tax Return

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