The tax rate for Pennsylvania inheritance tax is 4.5% for transfers to direct descendants (linear heirs), 12% for transfers to siblings, and 15% for transfers to other heirs (except charities, exempt institutions and government entities that are exempt from taxes). Inheritance tax is imposed as a percentage of the value of a deceased's estate transferred to beneficiaries by will, heirs by intestate succession and assignees by ministry of law. The tax rate varies depending on the relationship of the heir to the deceased. Jointly owned property between spouses is exempt from suce tax.
Inheritance tax payments are due on the death of the deceased and become delinquent nine months after the person's death. If inheritance tax is paid within three months of the decedent's death, a 5 percent discount is allowed. For more information and answers to frequently asked questions, see the brochure Pennsylvania Inheritance Tax and Safe Deposit Boxes. For detailed and historical information about Pennsylvania inheritance tax, see the Tax Compendium.
Pennsylvania Inheritance and Safe Deposit Box Taxes. Pennsylvania inheritance tax is technically a tax on the payee's right to receive their property. The amount of tax a payee pays depends on the value of the property they receive and their relationship to you. Traditionally, Pennsylvania inheritance tax had two tax rates.
A six percent rate was applied to assets that passed to so-called linear descendants, such as children, grandchildren and stepchildren. A rate of 15% applies to so-called beneficiaries of guarantees. This included brothers, sisters, nieces and nephews and everyone else. Transfers to charities were tax-free, as were property owned by spouses with survivors' rights.
These two types were the law until 1995, when a third type was introduced. That third rate is a zero percent rate that applies to assets left in the hands of a spouse. This spousal exemption is discussed in another article. The PA inheritance tax rate is 0% for property transferred to a surviving spouse or child under the age of 21.In short, there are practical ways to minimize or avoid PA inheritance tax without needing to move to a state without inheritance or inheritance taxes.
If payment is made within three months of the decedent's death, a five percent discount is allowed from taxes owed or taxes paid, whichever is less. Giving is especially beneficial when the beneficiaries of the property will be siblings (subject to a 12% PA inheritance tax rate) or those who fall into the “other category” (subject to a 15% PA inheritance tax rate). Heirs of other states owe Pennsylvania estate tax on real and tangible personal property located in Keystone State. Under the 2000 tax changes, the six percent rate dropped to 4.5% effective for those who die after June 30, 2000.
For those properties, many farms will now be exempt from inheritance tax if they move to so-called descendants or lineal siblings. Keep in mind that the real goal is probably something closer to protecting your own financial security and efficiently transferring assets to heirs, not necessarily minimizing PA inheritance taxes at all costs. If you pay Pennsylvania estate tax within 3 months of the date of death, you are entitled to a 5% discount. The death benefit paid in a life insurance policy is not subject to Pennsylvania estate tax.
However, siblings who are related by blood (including step-siblings and sisters) or by adoption pay a markedly higher tax rate of 12%. There is no alternative valuation for Pennsylvania inheritance tax purposes; therefore, the value of the property as of the date of death will be the value for tax purposes. Agricultural land is exempt from inheritance tax, provided that the land is inherited by family members and continues to be used for agriculture for seven years. PA inheritance tax rate is 15% for property transferred to other heirs (excluding charities and organizations that are exempt from PA inheritance tax).
The tax return is a complicated document, with many schedules listing the assets and responsibilities of the deceased person. Whether they will have to pay the tax and how much they will have to pay, depends on how closely they are related to you: the closer the family connection, the lower the tax rate. . .
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