What You Need to Know About Pa. Inheritance Tax – Daily Local

Pennsylvania is one of the few states that still imposes estate taxes on the transfer of assets from a deceased person to their heirs. There are inheritance taxes on probate and non-probate assets. Assets subject to estate tax include all tangible and intangible property located in the State of Pennsylvania. This includes real estate, retirement accounts, investments, savings bonds, personal property, bank accounts, etc. tax.

Inheritance tax rates depend on the relationship between the deceased and the person receiving the property. The tax rate for heirs in the direct line (children, stepchildren, grandchildren, etc.) is 4.5%. The rate for collateral heirs (such as siblings) is 12%. The tax for other heirs such as nieces and nephews or if not related is 15%. The surviving spouse of the deceased is taxed at 0%. Government entities and charitable organizations are exempt from inheritance tax.

Effective January 1, 2020, transfers from a parent or step-parent to a child (including an adopted child) or step-child under the age of 21 on the date of the parent’s or step-parent’s death. step-parent will be taxed at the rate of 0%. It is important to note that this new law only applies to transfers from a parent or step-parent to a child under 21; transfers to all other descendants (including grandparents to grandchildren under 21) will continue to be taxed at the rate of 4.5%.

Pennsylvania does not tax life insurance proceeds. Additionally, there are inheritance exemptions for specific situations and assets. For example, for people who died after January 1, 2020, who leave property to children under 21, they are taxed at 0%. In addition, there is an exemption for the transfer of a “qualified family business interest” to one or more “qualified transferees” without being subject to PA estate tax on the transferor’s death.

The Pennsylvania estate tax return must be filed and the tax must be paid within nine months of the date of death of the deceased. However, it is important to note that if the estate tax is prepaid, within three months of the death of the deceased, the Pennsylvania Department of Revenue grants a 5% reduction on the tax ultimately due. There are various deductions that can be taken from the total taxes due. Therefore, it is important to keep careful records in an estate administration to ensure that you are maximizing the various deductions.

The legal advice in this column is general in nature, consult your attorney for advice tailored to your particular situation.

Rebecca A. Hobbs, Esquire is licensed to practice in the Commonwealth of Pennsylvania and is certified as an elder law attorney by the National Elder Law Foundation, as licensed by the Supreme Court of Pennsylvania. She is a principal of the law firm of O’Donnell, Weiss & Mattei, PC, 41 High Street, Pottstown and 347 Bridge Street, Phoenixville, 610-323-2800, www. owmlaw.com. You can reach Ms. Hobbs at [email protected]

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