Pennsylvania Inheritance Tax 101
Pennsylvania mandates that an inheritance tax be paid on any assets transferred upon death in the Commonwealth. Here are a few basic points that are important to know regarding the inheritance tax.
- There is a separate federal estate tax. The federal estate tax works differently. You may or may not have to pay federal estate tax (modest size estates do not). Just because there is no federal estate tax does not mean there is no PA inheritance tax.
- The inheritance tax rates are: 0% to a spouse, 4.5% to direct lineal relatives (kids, parents), 12% to siblings, and 15% to all others.
- The tax is due 9 months after the decedent's death. Late fees, penalties and interest may be charged if the payment is received later than that.
- You should pay the tax as early as possible, and within 3 months if possible, to receive a 5% discount off the tax bill. For example, a $20,000 tax bill paid within 3 months would be reduced to $19,000.
- Typically, the probate/estate administration attorney prepares the PA inheritance tax return, federal estate tax return if necessary, and the final income tax return. Although you can complete these items yourself, it is not recommended.
- Any property that is transferred within one year of the death of the decedent is taxable for inheritance tax purposes. That means, if a person transferred their home to a child in January 2010 and died in February 2010, the house would still be taxable at 4.5% to that child.
For more information on the PA inheritance tax, check out the PA Revenue Dept's web site on PA Inheritance Tax.