Pennsylvania Levies an Inheritance Tax
In Pennsylvania, there's an inheritance tax.
Its rate depends upon the person who inherits it.
First, the surviving spouse is entirely exempt, which means the surviving spouse will not pay any state inheritance tax.
Also exempt are the surviving parents if death occurs before age 21 or as a result of injury or illness received while on active duty as a military member.
Next, close relatives (such as parents, grandparents, children, grandchildren, and other lineal descendants) are taxed on inheritances at a rate of 4.5%.
Siblings are taxed at 12%,
Everyone else is taxed at 15%.
Information about the inheritance tax return form, instructions, and tax rates can be found on Pennsylvania's Department of Revenue's website.
This state-specific inheritance tax is in addition to the federal estate tax, which also falls on the estate of the person who died, not on the people who inherit that property. There is an exemption of $10 million, which is indexed to inflation and is currently $12,920,000, and only people who die with an estate larger than that exemption will have to pay federal estate tax, which means that it is estimated that only the wealthiest .14% of Americans will be subject to the estate tax at all, or only 2 out of every 1,000 people who die.
If someone dies in Pennsylvania with less than the exemption amount (currently $12,920,000), their estate doesn't owe any federal estate tax. The heirs and beneficiaries inherit the property free of federal tax and don't pay income tax, either, because inherited property is not ordinary income. The only exception is inherited retirement accounts, which are subject to income tax as the assets are withdrawn.