Pennsylvania does not have a state estate tax
Pennsylvania has no estate tax at the state level. When someone dies, their heirs do not owe Pennsylvania state tax on inherited property or money. This is different from federal estate tax, which the IRS collects from very large estates, but Pennsylvania itself does not add a second layer of tax on top of that.
However, Pennsylvania does have an inheritance tax, which is a separate tax that applies to certain heirs. This tax is paid by the person who receives the inheritance, not by the estate itself. The inheritance tax rate and who pays it depend on the relationship between the deceased person and the heir.
Key Takeaways
- Pennsylvania has no state estate tax, so the estate itself owes nothing to Pennsylvania when the owner dies.
- Pennsylvania does have an inheritance tax that heirs must pay, with rates ranging from 0% to 15% depending on how closely related they are to the deceased.
- Spouses, children under 21, and charitable organizations pay 0% inheritance tax in Pennsylvania.
- Grandchildren, parents, and siblings pay between 4.5% and 15%, depending on the relationship.
- The executor of the estate typically files the inheritance tax return within nine months of the death.
How Pennsylvania's inheritance tax works
The inheritance tax is based on who inherits the money or property. Pennsylvania divides heirs into four categories, and each category has a different tax rate. A surviving spouse pays nothing. Children under age 21 also pay nothing. Lineal heirs—grandchildren, parents, and grandparents—pay 4.5%. Siblings pay 12%. Everyone else, including nieces, nephews, and unrelated people, pays 15%.
The tax applies to real estate located in Pennsylvania, bank accounts, stocks, and other property owned by someone who lived in Pennsylvania at the time of death. It also applies to property owned by a Pennsylvania resident even if the property is located elsewhere. If the deceased person did not live in Pennsylvania, the tax applies only to Pennsylvania real estate.
The executor—the person named in the will to handle the estate—is responsible for filing the inheritance tax return. This return must be filed within nine months of the death, though an extension can be requested. The executor pays the tax from the estate's funds before distributing money to the heirs.
What property is exempt from inheritance tax
Some types of property do not count toward the inheritance tax. Life insurance proceeds paid directly to a named beneficiary are exempt. Money in a payable-on-death bank account goes directly to the named beneficiary and is not taxed. Property that passes through a living trust also avoids the tax.
Certain assets held jointly with a right of survivorship pass directly to the surviving owner without going through the estate, and these are generally exempt as well. Property left to a surviving spouse is always exempt, regardless of the amount. Charitable donations are also exempt from the inheritance tax.
The difference between estate tax and inheritance tax
Estate tax and inheritance tax are often confused because they sound similar, but they work differently. An estate tax is paid by the estate itself before money goes to heirs. An inheritance tax is paid by the heirs after they receive their share. Pennsylvania has the second but not the first.
Federal estate tax is a separate matter. The federal government taxes estates worth more than a certain amount—that threshold changes yearly but is currently over $13 million for deaths in 2023 and 2024. Most Pennsylvania residents will not owe federal estate tax because their estates are smaller than that threshold. Pennsylvania adds nothing on top of the federal tax; the state straightforward does not have its own estate tax.
When you might owe nothing despite inheriting
If you inherit from a Pennsylvania resident and you are a surviving spouse, you owe 0% inheritance tax no matter how much you inherit. If you are a child under age 21, you also owe nothing. If you are a child over age 21, you owe nothing as well—children of any age are exempt.
If you are a parent or grandparent of the deceased, you pay 4.5%. If you are a sibling, you pay 12%. If you are a grandchild, you pay 4.5%. The tax is calculated on the value of what you inherit, not on the total estate. So if an estate is worth $100,000 and is split equally between two siblings, each sibling pays 12% on their $50,000 share, which is $6,000 each.
How to learn about you owe Pennsylvania inheritance tax
The executor of the estate should tell you whether you owe inheritance tax based on your relationship to the deceased and the amount you are inheriting. The executor files the return with the Pennsylvania Department of Revenue, and the department will send a bill if tax is owed. You do not file the return yourself unless you are the executor.
If you want to understand your own situation before the executor contacts you, you can look up the inheritance tax rates on the Pennsylvania Department of Revenue website. The rates are straightforward: find your relationship category, multiply your inheritance amount by the rate, and that is what you owe. The executor typically pays this from the estate funds, so you receive your inheritance after the tax has been deducted.
Frequently Asked Questions
Does Pennsylvania have an estate tax?
No. Pennsylvania has no state estate tax. The state does have an inheritance tax, which is different—it is paid by heirs based on their relationship to the deceased, not by the estate itself.
Do I have to pay federal estate tax if I live in Pennsylvania?
Only if the estate is worth more than the federal threshold, which is over $13 million for 2023 and 2024. Most Pennsylvania residents will not owe federal estate tax. Pennsylvania does not add its own estate tax on top of the federal tax.
If I inherit from my parent, do I owe Pennsylvania inheritance tax?
No. Children are exempt from Pennsylvania inheritance tax regardless of age or the amount inherited. Spouses are also exempt. If you are a sibling, grandchild, or more distant relative, you would owe tax based on your relationship category.
Can I avoid Pennsylvania inheritance tax by moving out of state?
If you inherit from someone who lived in Pennsylvania, you owe the tax based on the deceased person's residency at the time of death, not your own residency. However, if the property is located outside Pennsylvania and the deceased did not live in Pennsylvania, the tax does not explore.
Who files the Pennsylvania inheritance tax return?
The executor of the estate files the return with the Pennsylvania Department of Revenue within nine months of the death. The executor pays the tax from estate funds before distributing money to heirs, so heirs typically receive their inheritance after the tax has been deducted.