Pennsylvania Inheritance Tax: Complete 2025 Guide

Pennsylvania is one of only six states that still imposes an inheritance tax — and the only one that taxes a child's inheritance from a parent at a flat rate. If you live in Pennsylvania, or if you own real estate here, the inheritance tax is the single largest planning factor in your estate.

What is the Pennsylvania inheritance tax?

Pennsylvania's inheritance tax (72 P.S. § 9101 et seq.) is a tax on the transfer of property at death. Unlike the federal estate tax, which is paid by the estate and only applies above $13.99 million (2025), the Pennsylvania inheritance tax is paid on the first dollar — and the rate depends on who is inheriting.

Pennsylvania inheritance tax rates (2025)

The rates have not changed for 2025:

• 0% — transfers to a surviving spouse
• 0% — transfers to a parent from a child age 21 or younger
• 4.5% — transfers to direct descendants (children, grandchildren) and lineal heirs (parents, grandparents)
• 12% — transfers to siblings
• 15% — transfers to all other beneficiaries (nieces, nephews, friends, unmarried partners)
• 0% — transfers to qualifying charities and government entities

A 5% discount applies if the tax is paid within three months of the date of death.

What is taxed

Pennsylvania taxes:

• Real estate located in Pennsylvania (even if the owner lived elsewhere)
• All probate assets of a Pennsylvania resident, wherever located
• Bank accounts, brokerage accounts, and most personal property
• Jointly held property — at the deceased's fractional interest, with limited spousal exceptions
• Retirement accounts, with one important exception (below)

Pennsylvania inheritance tax on retirement accounts and IRAs

This is the most-asked and most-misunderstood part of the statute. A traditional IRA, Roth IRA, 401(k), or 403(b) is exempt from Pennsylvania inheritance tax if the decedent died before reaching age 59½. If they died at age 59½ or older, the full account value is taxable at the beneficiary's rate.

This is a genuine planning opportunity for clients with significant pre-tax retirement assets — and a reason to revisit beneficiary designations and Roth-conversion timing.

Exemptions and exclusions

• The family exemption ($3,500) for the surviving spouse or qualifying household members
• Life insurance proceeds paid to a named beneficiary — fully exempt
• Property owned jointly with a spouse with right of survivorship — fully exempt
• Qualified family-owned business interests — exempt under 72 P.S. § 9111(t) if requirements are met
• Agricultural real estate transferred to qualifying family members

How to avoid Pennsylvania inheritance tax

You cannot eliminate it for non-spouse beneficiaries, but you can substantially reduce it:

1. Lifetime gifting — gifts made more than one year before death are not subject to PA inheritance tax (there is no annual gift tax in Pennsylvania).
2. Life insurance — naming individuals as direct beneficiaries removes proceeds from the taxable estate.
3. Joint titling with a spouse — assets pass tax-free.
4. Family-owned business exemption — for qualifying closely held businesses.
5. Charitable bequests — fully exempt.
6. Pre-59½ retirement account planning — for clients with significant pre-tax accounts.
7. Irrevocable trusts — for high-net-worth families, properly structured trusts can remove assets from the taxable estate. (For the more common revocable variant, see our Pennsylvania revocable living trust guide.)

Pennsylvania estate tax vs. inheritance tax

Pennsylvania has no separate state estate tax — only the inheritance tax described above. The federal estate tax still applies to estates over $13.99 million (2025), so for most Pennsylvania families the inheritance tax is the only death tax to plan for.

Filing and payment

The inheritance tax return (REV-1500) is due nine months after the date of death, filed with the Register of Wills in the county of residence. Payment is due at the same time, though the 5% discount rewards payment within three months.

When to get help

If your estate includes Pennsylvania real estate, a closely held business, significant retirement accounts, or beneficiaries outside your immediate family, the inheritance tax cost of doing nothing is usually five to six figures. Most of that is avoidable with planning done years before it's needed — typically through a properly drafted Pennsylvania will paired with beneficiary and titling work, or a revocable living trust for clients with real estate or out-of-state property.