Estate and Inheritance Tax in Pennsylvania 2026
Estate and Inheritance Tax in Pennsylvania 2026
Pennsylvania is one of only five states (along with Kentucky, Maryland, Nebraska, and New Jersey) that imposes an inheritance tax. This is the single most important financial fact for Pennsylvania estates. Unlike the federal estate tax, which has a $15,000,000 exemption, Pennsylvania's inheritance tax has no exemption threshold -- it applies to the first dollar. Virtually every Pennsylvania estate owes inheritance tax unless all assets pass to a spouse or charity. This guide explains the rates, what is taxable, the filing process, the early payment discount, and how the tax interacts with the federal estate tax.
Pennsylvania Inheritance Tax Rates
The tax rate depends entirely on the relationship between the deceased and the beneficiary (72 P.S. section 9116):
| Beneficiary Relationship | Tax Rate |
|---|---|
| Surviving spouse | 0% |
| Parent from child aged 21 or younger | 0% |
| Lineal descendants (children, grandchildren, great-grandchildren) | 4.5% |
| Lineal ancestors (parents, grandparents) receiving from adult child | 4.5% |
| Siblings (brother, sister, half-siblings) | 12% |
| All other individuals (nieces, nephews, friends, unmarried partners) | 15% |
| Charitable organizations and government entities | 0% |
What this costs in practice:
| Estate Value | To Child (4.5%) | To Sibling (12%) | To Nephew (15%) |
|---|---|---|---|
| $100,000 | $4,500 | $12,000 | $15,000 |
| $250,000 | $11,250 | $30,000 | $37,500 |
| $500,000 | $22,500 | $60,000 | $75,000 |
| $1,000,000 | $45,000 | $120,000 | $150,000 |
Step-Children Get the 4.5% Rate
A common misconception is that step-children are taxed at 15%. Pennsylvania law expressly treats step-children and step-descendants as lineal descendants, making them eligible for the 4.5% rate (72 P.S. section 9116(a)(1.1)).
The step-child relationship is established by the marriage of the step-parent to the biological parent. Formal adoption is not required. On a $200,000 inheritance, this is the difference between $9,000 (4.5%) and $30,000 (15%) -- a $21,000 savings.
Filing Deadline and Early Payment Discount
| Detail | Information |
|---|---|
| Tax is due | Upon the date of death |
| Becomes delinquent | 9 months from date of death |
| 5% discount | If tax is paid within 3 months of death |
| Extension | 6-month extension available upon request |
| Interest on late payment | Variable annual rate set by PA Department of Revenue (tied to IRC section 6621(a)(2)), accruing from 9 months after death |
The early payment discount is real money. On a $500,000 estate going to children (tax = $22,500), paying within 3 months saves $1,125. On larger estates, the savings are proportionally greater. Prioritize gathering asset valuations quickly so you can take advantage of the discount.
What Assets Are Subject to Inheritance Tax
Pennsylvania's inheritance tax applies to more than just probate assets. This catches many families by surprise.
| Asset Type | Taxable? | Notes |
|---|---|---|
| Probate assets (solely-owned) | Yes | All property in the estate |
| Real estate in PA | Yes | Even if non-probate transfer |
| Jointly-owned property (non-spouse) | Yes, decedent's share | Reported on Schedule F (REV-1509) |
| Jointly-owned property (spouse) | No | Exempt |
| Revocable trust assets | Yes | Treated as part of taxable estate |
| IRAs and retirement accounts | Generally yes | Based on beneficiary relationship |
| TOD/POD accounts | Yes | Non-probate but taxable |
| Life insurance to named beneficiary | Generally no | Exempt per 72 P.S. section 9111(h) |
| Life insurance payable to estate | Yes | Included in estate |
| Gifts within 1 year of death | Yes | Reported on Schedule G (REV-1510) |
Exemptions and Exclusions
| Exemption | Detail |
|---|---|
| Spousal transfers | All property to surviving spouse at 0% |
| Parent from minor child | Transfers to parent from child aged 21 or younger at 0% |
| Jointly-owned spousal property | Exempt |
| Charitable organizations | 0% rate |
| Government entities | 0% rate |
| Agricultural property | Farmland transferred to eligible recipients (deaths after 6/30/2012); must generate $2,000+ gross annual income (72 P.S. section 9111(s)) |
| Military service deaths | Personal property of military members who died from active duty-related injury or illness (effective 9/6/2022) |
| Family exemption | First $3,500 claimed under 20 Pa.C.S. section 3121 |
| Life insurance to named beneficiary | Generally exempt (72 P.S. section 9111(h)) |
Pennsylvania Does NOT Have a State Estate Tax
Pennsylvania repealed its state estate tax. The only estate-level tax in Pennsylvania is the inheritance tax described above. These are different taxes:
- Estate tax: Paid by the estate as a whole before distribution. Pennsylvania does not have one.
- Inheritance tax: Paid based on each beneficiary's relationship to the deceased. Pennsylvania has this.
The distinction matters because inheritance tax rates vary by recipient. A single estate can owe 0% on amounts going to the spouse, 4.5% on amounts going to children, and 15% on amounts going to a friend -- all on the same estate.
Federal Estate Tax Still Applies to Very Large Estates
| Detail | Information |
|---|---|
| Federal exemption (2026) | $15,000,000 per person |
| Set by | One Big Beautiful Bill Act (P.L. 119-21), signed July 4, 2025 |
| Top rate | 40% on amounts above exemption |
| Filing form | IRS Form 706 |
| Due date | 9 months after death |
| Portability | Surviving spouse can inherit unused exemption; requires filing Form 706 |
Pennsylvania inheritance tax paid may be deducted on the federal estate tax return. However, fewer than 0.1% of deaths trigger a federal estate tax obligation. For most Pennsylvania families, the inheritance tax is the only death tax that matters.
Pennsylvania State Income Tax
Pennsylvania has a flat 3.07% state income tax. After a death, these returns are required:
Final PA-40: Covers January 1 through date of death. Due April 15 of the following year.
PA-41 (Fiduciary return): If the estate generates income after death (interest, dividends, rent, capital gains), a PA-41 must be filed. The estate needs its own EIN.
This is different from states like Texas and Florida that have no state income tax. Pennsylvania executors must file both federal and state income tax returns.
Forms Required
| Form | Purpose |
|---|---|
| REV-1500 | Inheritance Tax Return (Resident Decedent) |
| REV-1737-A | Inheritance Tax Return (Nonresident Decedent with PA property) |
| REV-1502 (Sch. A) | Real Estate |
| REV-1503 (Sch. B) | Stocks and Bonds |
| REV-1504 (Sch. C) | Closely-Held Business Interests |
| REV-1508 (Sch. E) | Cash, Bank Deposits, Misc. Personal Property |
| REV-1509 (Sch. F) | Jointly-Owned Assets |
| REV-1510 (Sch. G) | Inter-Vivos Transfers and Non-Probate Property |
| REV-1511 (Sch. H) | Funeral Expenses and Administrative Costs |
Forms available at pa.gov/agencies/revenue/forms-and-publications (Inheritance Tax section).
Interaction with Federal Estate Tax
| Factor | PA Inheritance Tax | Federal Estate Tax |
|---|---|---|
| Threshold | $0 -- applies to first dollar | $15,000,000 (2026) |
| Who pays | Each beneficiary based on relationship | Estate as a whole |
| Rate structure | 0%, 4.5%, 12%, or 15% by relationship | 18%-40% progressive |
| Deductibility | May be deducted on federal Form 706 | Federal credit for state death taxes |
| Most PA estates affected? | Yes -- virtually all | No -- only very large estates |
Tax Planning Considerations
Spousal transfers are tax-free. All property passing to a surviving spouse pays 0% inheritance tax. For married couples, structuring ownership to maximize spousal transfers can eliminate the inheritance tax entirely during the first death.
Life insurance planning. Life insurance payable to a named beneficiary is generally exempt from inheritance tax. Life insurance payable to the estate is taxable. Ensure policies name individuals, not the estate, as beneficiaries.
Gifts within one year are pulled back. Transfers made within one year before death are included in the taxable estate. Last-minute gifting does not reduce the inheritance tax.
Trusts do not avoid inheritance tax. A revocable living trust avoids probate, but the assets are still subject to inheritance tax.
Agricultural exemption. Working farmland transferred to eligible recipients can be exempt if the property generates $2,000 or more in gross annual income (72 P.S. section 9111(s)).
Frequently Asked Questions
Does Pennsylvania have an estate tax? No. Pennsylvania repealed its state estate tax. It has an inheritance tax, which is a different tax based on the beneficiary's relationship to the deceased.
Is there an exemption amount for Pennsylvania inheritance tax? No. Unlike the federal estate tax ($15M exemption), Pennsylvania inheritance tax applies to the first dollar. Every estate owes it unless all assets pass to a spouse or charity.
Are step-children taxed at 15%? No. Step-children and step-descendants are treated as lineal descendants and qualify for the 4.5% rate. Formal adoption is not required.
Can I reduce the inheritance tax by putting assets in a trust? A revocable trust does not reduce inheritance tax. The assets are treated as part of the taxable estate. Irrevocable trusts may have different treatment depending on structure -- consult an estate planning attorney.
What to Do Next
If you are an executor or family member managing a Pennsylvania estate:
- Determine who inherits and at what inheritance tax rate.
- Gather asset valuations quickly to take advantage of the 3-month early payment 5% discount.
- File Form REV-1500 within 9 months of death.
- File the deceased's final PA-40 and federal Form 1040 by April 15 of the following year.
- If the estate exceeds $15M, contact a Pennsylvania estate attorney and CPA immediately for federal Form 706.
For the full sequence of tasks, see the complete guide to what to do when someone dies in Pennsylvania.
Kaira organizes every step for your state -- deadlines, forms, and next actions -- so nothing gets missed. See how it works.
This guide reflects Pennsylvania and federal estate tax law as of April 2026, including the One Big Beautiful Bill Act (P.L. 119-21). Tax laws change. For estates with complex inheritance tax situations, consult a Pennsylvania-licensed estate planning attorney and a CPA.
Sources: 72 P.S. section 9101 et seq. (Inheritance and Estate Tax Act of 1991); IRC section 2010(c)(3) (Federal Estate Tax Exemption); pa.gov/agencies/revenue; IRS Publication 559