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, regardless of the estate's size. This is different from the federal estate tax, which applies to very large estates nationwide and is managed by the IRS, not by Pennsylvania.

However, Pennsylvania does have an inheritance tax, which is a separate tax that applies to certain people who receive money or property from a deceased person's estate. The inheritance tax is paid by the person who inherits, not by the estate itself. This distinction matters because the tax rate and who pays depends on the relationship between the deceased and the heir.

Key Takeaways

  • Pennsylvania has no state estate tax, so the estate itself owes nothing to Pennsylvania when someone 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 and direct descendants (children and grandchildren) pay 0% inheritance tax in Pennsylvania.
  • Siblings pay 12% inheritance tax, and all other heirs pay 15% inheritance tax.
  • The executor of the estate files the inheritance tax return with the Pennsylvania Department of Revenue within nine months of the death.

How Pennsylvania's inheritance tax works

The Pennsylvania inheritance tax is calculated based on the relationship between the person who died and the person who inherits. The closer the relationship, the lower the tax rate. Spouses and lineal descendants—children, grandchildren, and great-grandchildren—pay 0% and owe no tax at all. This covers the most common inheritance situations.

Siblings of the deceased pay a 12% tax on what they inherit. Everyone else—aunts, uncles, cousins, friends, and unrelated parties—pays 15%. The tax is calculated on the value of the property or money each person receives, not on the total estate value. If an estate is divided among multiple heirs in different relationship categories, each heir's portion is taxed at their own rate.

Who files the inheritance tax return

The executor of the estate (the person named in the will to manage the estate, or appointed by the court if there is no will) is responsible for filing the Pennsylvania inheritance tax return. This return must be filed with the Pennsylvania Department of Revenue within nine months of the person's death.

The executor needs to report the value of all property and money that passes to heirs, including real estate, bank accounts, investments, and personal property. Some assets that pass directly to beneficiaries outside the will—such as life insurance proceeds, retirement accounts with named beneficiaries, or property held in joint tenancy—may not be subject to the inheritance tax, but the executor should still report them to be certain.

What property is subject to the inheritance tax

Most property that passes from a deceased person to heirs is subject to Pennsylvania's inheritance tax. This includes real estate located in Pennsylvania, bank accounts, stocks, bonds, vehicles, and personal belongings. The tax applies to the full value of the property at the time of death.

Some assets are not subject to the inheritance tax. These include property that passes to a spouse, property that passes to a direct descendant (child or grandchild), life insurance proceeds paid to a named beneficiary, retirement accounts (IRAs, 401(k)s) paid to a named beneficiary, and property held in a trust. Property passing to charitable organizations and religious institutions is also exempt. The executor should document which assets fall into these categories to avoid overpaying tax.

Federal estate tax versus Pennsylvania inheritance tax

The federal estate tax and Pennsylvania inheritance tax are two separate taxes that operate differently. The federal estate tax applies only to very large estates—in 2024, only estates worth more than $13.61 million are subject to federal tax. Most Pennsylvania residents will never owe federal estate tax. When federal tax does apply, it is paid by the estate itself before money is distributed to heirs.

Pennsylvania's inheritance tax, by contrast, applies to estates of any size and is paid by the heirs based on their relationship to the deceased. A small estate with a 15% inheritance tax rate can owe more in state tax than a large estate where all heirs are spouses or children (who pay 0%). The two taxes do not overlap—an estate that owes federal tax will also file a Pennsylvania inheritance tax return, but the calculations are separate.

Deadlines and penalties for late payment

The Pennsylvania inheritance tax return must be filed within nine months of the person's death. If the return is filed late, the Department of Revenue charges a penalty of 5% per month, up to a maximum of 25% of the tax owed. Interest also accrues on any unpaid tax at a rate set by the state, currently 6% per year.

If the executor cannot file by the nine-month deadline, they can request an extension from the Department of Revenue. Extensions are not automatic—the executor must file a written request before the deadline expires. Even with an extension, interest continues to accrue on any unpaid tax. Paying the inheritance tax on time is important because penalties and interest can add significantly to the amount owed.

Frequently Asked Questions

Do I have to pay Pennsylvania inheritance tax if the person who died lived out of state?

It depends on where the property is located. If the deceased person owned real estate or other property in Pennsylvania, Pennsylvania inheritance tax applies to that property even if the person lived elsewhere. If all the property is located outside Pennsylvania, Pennsylvania has no claim to inheritance tax. The executor should check where each asset is located.

What if someone inherits property from a Pennsylvania resident but lives in another state?

Pennsylvania inheritance tax applies based on where the property is and the relationship of the heir to the deceased, not where the heir lives. If you inherit Pennsylvania property from a Pennsylvania resident and you are not a spouse or direct descendant, you owe Pennsylvania inheritance tax at the rate for your relationship category, regardless of your state of residence.

Can I avoid Pennsylvania inheritance tax by putting property in a trust?

Property placed in a revocable living trust during the person's lifetime is generally not subject to Pennsylvania inheritance tax because it does not pass through the estate. However, the trust must be properly drafted and funded. An irrevocable trust may also avoid the tax, but the rules are complex and depend on how the trust is structured. Consult an attorney who handles estate planning in Pennsylvania.

What happens if the executor does not file the inheritance tax return?

The Department of Revenue can pursue the executor and the heirs for unpaid tax, penalties, and interest. Heirs can also be held personally liable for the inheritance tax owed on their portion of the estate. If you are an heir and the executor has not filed, you may want to contact the Department of Revenue or consult an attorney to protect yourself.