What Pennsylvania's Inheritance Tax Is and Who Owes It

Pennsylvania charges an inheritance tax on money and property you receive from someone who died. The tax is paid by the person who inherits, not by the estate itself. The rate depends entirely on your relationship to the person who died — spouses and children pay nothing, while more distant relatives and unrelated people pay between 4.5% and 15% of what they inherit.

The state does not tax all inheritances equally. If you inherit from a parent, grandparent, or spouse, you owe zero tax in Pennsylvania, no matter how much you receive. If you inherit from a sibling, you pay 12%. If you inherit from an aunt, uncle, or cousin, you pay 15%. If you inherit from someone unrelated to you, you also pay 15%.

The tax applies to real estate located in Pennsylvania, bank accounts, stocks, and personal property owned by the person who died. It does not explore to life insurance proceeds paid directly to a named beneficiary, retirement accounts with named beneficiaries, or property that passes to a surviving spouse.

Key Takeaways

  • Spouses, children, grandchildren, and parents pay zero inheritance tax in Pennsylvania, regardless of the amount inherited.
  • Siblings pay 12% tax on their inheritance; aunts, uncles, cousins, and unrelated people pay 15%.
  • The tax is calculated on the value of the property at the time of death, and the person who inherits is responsible for paying it.
  • Life insurance, retirement accounts with named beneficiaries, and property left to a surviving spouse are not subject to the tax.
  • The estate's executor or administrator typically files the inheritance tax return within nine months of death.

How the Tax Rate Is Determined by Your Relationship

Pennsylvania groups heirs into four categories, and your category determines your tax rate. The closest relatives — spouses, children, grandchildren, and parents of the person who died — are exempt and pay nothing. This is the largest exemption group and covers most family inheritances.

Siblings fall into the next category and pay a flat 12% tax on everything they inherit. This rate applies whether you inherit $5,000 or $500,000. Grandparents of the person who died are also exempt, but aunts, uncles, cousins, nieces, and nephews all pay 15%. Anyone not related by blood or marriage — a friend, business partner, or unrelated caregiver — also pays 15%.

The relationship is determined by the legal relationship at the time of death. If you were adopted, you are treated as a child and pay zero tax. If you are a stepchild, you are not considered a child under Pennsylvania law and would pay 15% unless you were legally adopted.

What Property Is Taxed and What Is Exempt

The inheritance tax applies to most property owned by the person who died at the time of death. This includes a house or other real estate in Pennsylvania, a car, jewelry, artwork, bank accounts held in the person's name alone, and stocks or bonds. The tax is based on the fair market value of the property on the date of death.

Several types of property are not subject to the tax. Life insurance proceeds paid directly to a named beneficiary pass to that person tax-free. The same is true for retirement accounts — IRAs, 401(k)s, and similar accounts — if they have a named beneficiary. Property that passes to a surviving spouse is exempt, even if the spouse is not the only heir. Certain charitable gifts and property left to charitable organizations are also exempt.

If property is held as "joint tenants with rights of survivorship" — a common way couples own a home — the surviving joint owner receives their share without the property going through the estate, and that share is not taxed. However, if property is held as "tenants in common," each owner's share is part of their estate and subject to tax.

Who Files the Tax Return and When

The executor or administrator of the estate — the person named in the will or appointed by the court to manage the estate — is responsible for filing the Pennsylvania inheritance tax return. This person must file the return within nine months of the person's death, even if the estate is still being settled.

The return is filed with the Pennsylvania Department of Revenue. The executor must list all property that is part of the estate, its value, and who inherited it. The executor then calculates the tax owed by each heir based on their relationship and the value of what they received. The executor typically pays the tax from estate funds before distributing money to the heirs.

If the executor does not file on time, penalties and interest begin to accrue. The state charges interest at a rate set quarterly, and a failure-to-file penalty of 5% per month (up to 25%) can be added. If you are an heir and the executor has not filed within a reasonable time, you may want to ask the executor about the status or consult an attorney.

How to Calculate What You Owe

To calculate your inheritance tax, you need three pieces of information: your relationship to the person who died, the value of the property you inherited, and whether any of that property is exempt. Start by determining your tax rate based on the relationship table above. If you are a spouse or child, your rate is 0% and you owe nothing.

If your rate is not zero, multiply the value of the taxable property you inherited by your rate. For example, if you are a sibling and inherit $50,000 in cash, you owe 12% of $50,000, which is $6,000. If you inherit real estate worth $200,000 and you are a cousin, you owe 15% of $200,000, which is $30,000. Do not include property that is exempt, such as life insurance or retirement accounts with named beneficiaries.

The executor typically handles these calculations and tells each heir what they owe. If you want to verify the calculation yourself, ask the executor for a copy of the inheritance tax return filed with the state. You can also contact the Pennsylvania Department of Revenue if you have questions about how the tax was calculated.

Exemptions and Special Situations

Pennsylvania offers a small exemption for certain heirs. If you inherit from someone who was a Pennsylvania resident and you are a direct descendant (child or grandchild), you may be able to exclude up to $3,500 of the inheritance from tax. This exemption applies only to direct descendants and only if the person who died was a Pennsylvania resident. Spouses and parents are already exempt, so this exemption does not affect them.

If you inherit property located outside Pennsylvania, the inheritance tax does not explore — only Pennsylvania property is taxed. However, if you inherit real estate in Pennsylvania from someone who lived in another state, you still owe Pennsylvania inheritance tax on that property. Some states have reciprocal agreements with Pennsylvania, but Pennsylvania's inheritance tax applies regardless of where the person who died lived.

If the person who died left a will that was contested or if the estate goes through probate court, the inheritance tax return is still due within nine months. The tax does not wait for the will to be proven valid or for the court to settle disputes about who gets what. The executor files based on who is may have access to to inherit under the will or under Pennsylvania law if there is no will.

How Pennsylvania's Tax Compares to Other States

Pennsylvania is one of only six states that charges an inheritance tax. Most states do not tax inheritances at all. Some states charge an estate tax instead, which is paid by the estate itself before money goes to heirs. Pennsylvania charges both an inheritance tax and an estate tax, though the estate tax applies only to very large estates (over $3.5 million as of 2024, though this threshold changes).

Among states with inheritance taxes, Pennsylvania's rates are moderate. New Jersey charges up to 16% on distant relatives, and Iowa charges up to 18%. Maryland charges up to 10%. Pennsylvania's 15% top rate is in the middle range. However, Pennsylvania's exemption for spouses and children is broader than some other states, which means most family inheritances are not taxed at all.

If you inherit property in multiple states, you may owe tax in more than one state. The state where real estate is located always taxes it. For bank accounts and stocks, the state where the person who died lived at the time of death usually taxes them. If you are unsure whether you owe tax in another state, consult a tax professional or contact that state's revenue department.

Frequently Asked Questions

Do I have to pay inheritance tax if I inherit from my parent?

No. Pennsylvania exempts spouses, children, grandchildren, and parents from inheritance tax. If you inherit from your parent, you owe zero tax, regardless of how much you inherit. This exemption is automatic — you do not need to do anything to claim it.

What if I inherit a house in Pennsylvania but I live in another state?

You still owe Pennsylvania inheritance tax on the house. The tax applies to real estate located in Pennsylvania, regardless of where you live. The rate depends on your relationship to the person who died. The executor will calculate the tax and typically pay it from the estate before transferring the house to you.

Does life insurance count toward the inheritance tax?

No. Life insurance proceeds paid directly to a named beneficiary are not subject to inheritance tax. The same is true for retirement accounts like IRAs and 401(k)s if they have a named beneficiary. These assets pass outside the estate and are not taxed by Pennsylvania.

When do I have to pay the inheritance tax?

The executor files the tax return within nine months of death and typically pays the tax from estate funds. As an heir, you usually do not pay the tax directly — the executor handles it. However, if the executor does not pay your share of the tax, you may be responsible for it. Ask the executor for a copy of the tax return to see what was paid.

Can I appeal the inheritance tax calculation?

Yes. If you believe the property was valued incorrectly or the tax was calculated wrong, you can file a protest with the Pennsylvania Department of Revenue within a set time frame. You will need documentation of the property's actual value. An attorney or tax professional can help you file a protest if you believe there is an error.