Pennsylvania Inheritance Tax FAQ | Rates, Exemptions &…

Question 1

What are the Pennsylvania inheritance tax rates?

Accepted Answer

Pennsylvania charges 0% on transfers to a surviving spouse, 0% on transfers to a parent from a child age 21 or younger, 4.5% on transfers to lineal descendants and direct ancestors (children, grandchildren, parents, grandparents), 12% on transfers to siblings, and 15% on transfers to all other heirs (nieces, nephews, friends, most unrelated beneficiaries). Transfers to qualified charities are exempt.

Question 2

Is there an exemption amount for Pennsylvania inheritance tax?

Accepted Answer

No general exemption. Unlike the federal estate tax, Pennsylvania inheritance tax applies from the first dollar. There are targeted exemptions — the family-owned business exemption, the family farm exemption, life insurance paid to a named beneficiary, and certain retirement accounts paid to beneficiaries who would have been able to withdraw without penalty — but no $1,000,000 or $15 million floor.

Question 3

When is the Pennsylvania inheritance tax return due?

Accepted Answer

The REV-1500 inheritance tax return is due nine months from the date of death. Pennsylvania allows a 5% discount on tax paid within three months of death, which is the single largest planning lever after the return is filed. Late returns accrue interest from the nine-month date.

Question 4

Who files the Pennsylvania inheritance tax return?

Accepted Answer

The personal representative (executor or administrator) files the REV-1500 with the Register of Wills in the county where the decedent resided. If there is no formal estate, a transferee or trustee may need to file. Each separate trust or non-probate transfer can require its own return.

Question 5

Does life insurance get taxed by Pennsylvania inheritance tax?

Accepted Answer

Life insurance proceeds paid to a named beneficiary are exempt from Pennsylvania inheritance tax. Proceeds paid to the estate (no beneficiary named, or the estate is the beneficiary) are taxable. This is one of the easiest planning fixes — confirm a real human beneficiary is named on every policy.

Question 6

Are retirement accounts subject to Pennsylvania inheritance tax?

Accepted Answer

It depends on the decedent's age and the type of account. Generally, retirement accounts owned by someone who died before reaching age 59½ are exempt from PA inheritance tax (because the owner could not have withdrawn without penalty). Accounts owned by someone who died at 59½ or older are taxable at the beneficiary's rate. Roth IRAs follow the same rules.

Question 7

Does Pennsylvania tax property owned jointly with right of survivorship?

Accepted Answer

Generally yes, on the decedent's fractional share, with two big exceptions: (1) property held jointly with a spouse is fully exempt, and (2) property put into joint name within one year of death is taxed at 100% (the anti-deathbed rule). Joint accounts with adult children are a common — and often taxable — surprise.

Question 8

How does Pennsylvania tax gifts made before death?

Accepted Answer

Pennsylvania imposes a one-year lookback: gifts made within one year of death are pulled back into the inheritance tax base, less a $3,000 per donee annual exclusion. Gifts made more than one year before death are not subject to PA inheritance tax. There is no separate PA gift tax.

Question 9

Can a revocable living trust avoid Pennsylvania inheritance tax?

Accepted Answer

No. A revocable trust avoids probate but the assets are still treated as the decedent's for inheritance tax purposes and are reported on the REV-1500. Inheritance tax reduction usually requires irrevocable structures, lifetime gifting outside the one-year window, beneficiary designation planning, or qualifying for a family-business or farm exemption.

Question 10

What qualifies for the Pennsylvania family-owned business exemption?

Accepted Answer

Act 52 of 2013 exempts transfers of a qualified family-owned business interest from PA inheritance tax if the business has fewer than 50 full-time employees, less than $5 million in net book value, has been in existence for at least five years, passes to qualified family members, and the recipients continue to own it for at least seven years. The rules are technical and recapture is real — proper structure before death matters.

Pennsylvania Inheritance Tax

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