Pennsylvania Inheritance Tax: Rates, Exemptions, and Deductions

The Pennsylvania inheritance tax applies to almost everything a deceased Pennsylvania resident passes to a beneficiary, at rates between 0% and 15% depending on how the heir was related to the person who died. There is no minimum threshold: the tax applies from the first dollar. The person receiving the inheritance owes it, and it applies whether or not there was a will. The return and payment are due nine months after the date of death, though paying within the first three months earns a 5% discount.¹

What You’ll Pay Based on Your Relationship

Your rate is set entirely by how you were related to the decedent. The closer the relationship, the lower the rate.

0% for a surviving spouse, for a parent inheriting from a child aged 21 or younger, and for a child aged 21 or younger inheriting from a parent.
4.5% for lineal descendants and ancestors: children over 21, grandchildren, parents, grandparents, and their spouses. Adopted children and stepchildren are included at this rate.
12% for siblings who share at least one biological or adoptive parent with the decedent.
15% for everyone else, including nieces, nephews, cousins, friends, and unmarried partners.

When property passes jointly to a married couple and one spouse would face a higher rate than the other, the lower rate applies to the whole interest.²

The federal estate tax is a separate matter and only hits estates above $15 million in 2026.³ Pennsylvania’s tax is owed independently of it.

What’s Taxable

Almost every asset of value that transfers at death counts. Pennsylvania real estate is taxable regardless of where the heir lives. So are vehicles, jewelry, furniture, art, and other tangible personal property, valued at fair market price as of the date of death. Bank accounts, brokerage accounts, stocks, bonds, and business interests make up the bulk of most taxable estates.

Retirement Accounts

Many families assume IRAs and 401(k)s are exempt. They are not. If the account holder was 59½ or older at death, the full value of the retirement account is subject to inheritance tax at the applicable rate. Retirement accounts of someone who died before reaching 59½ are generally exempt.

Jointly Owned Property

Property owned jointly by spouses is completely exempt.⁴ For any other co-owners, such as siblings, a parent and adult child, or unmarried partners, the decedent’s fractional share is taxed. If two non-spouses share a bank account equally, 50% of the balance is taxed when one dies.¹

Revocable Living Trusts

A revocable living trust does not avoid Pennsylvania inheritance tax. It avoids probate, which saves time and court fees, but the state taxes everything in the trust at the same rates as property passing by will. Only carefully structured irrevocable trusts created well before death can reduce inheritance tax exposure.

What’s Exempt

Life insurance proceeds paid to a named beneficiary or trust are fully exempt, no matter how large the policy or who receives it. Refunds of unearned premiums and post-mortem dividends on life insurance are treated the same way.⁴

Transfers to qualifying 501(c)(3) charities and government entities are exempt. This covers gifts to religious institutions, schools, and veterans’ groups.¹

Military service members who died from an injury or illness received while on active duty, in a reserve component, or in the National Guard pass their personal property free of inheritance tax. This applies to estates of decedents dying on or after September 6, 2022.¹

Family-Owned Businesses

A qualifying small business can pass to family members tax-free, but the conditions are strict. The business must have fewer than 50 full-time equivalent employees, a net book value under $5 million, and at least five years of operating history. It cannot be primarily an investment holding company. The new owners must keep the business for at least seven years after the death and file annual certifications with the Department of Revenue during that period. Missing any requirement means losing the exemption and owing the tax.⁵

Agricultural Land

Farmland devoted to agriculture at the time of death can pass to family members tax-free if the land stays in agricultural use and generates at least $2,000 in gross agricultural income annually for seven years after death. The claim must be made on a timely filed return. Losing agricultural use during the seven-year period triggers the tax retroactively.⁶

Deductions That Lower the Bill

Pennsylvania taxes net value, not gross. Debts of the decedent come off first: credit card balances, personal loans, remaining mortgage principal, and medical bills incurred before death that insurance didn’t cover. You’re only taxed on wealth the decedent actually had.

Funeral and burial expenses are deductible, including casket, cemetery plot, gravestone, and service costs. Administrative expenses of settling the estate also qualify, including attorney fees, executor commissions, and appraisal fees. Keep documentation for everything you claim.

The $3,500 Family Exemption

Pennsylvania allows a $3,500 family exemption that reduces the taxable estate, available only to certain household members. The surviving spouse gets first priority. With no surviving spouse, a child who lived in the same household as the decedent can claim it. With no spouse or qualifying child, a parent in the same household may claim it. The exemption only applies to assets passing by will or under Pennsylvania’s intestacy laws, so assets held in trusts or in payable-on-death accounts don’t qualify.⁷

Filing the Return

The personal representative files Form REV-1500 with the Register of Wills in the county where the decedent lived.⁸ The form requires the decedent’s Social Security number, date of death, and a detailed listing of every asset with its date-of-death value. Real estate and business interests usually need professional appraisals. Financial institutions provide date-of-death balance statements for bank and investment accounts.

If the decedent lived outside Pennsylvania but owned real estate or tangible personal property in the state, the executor files Form REV-1737-A instead.⁹ Intangible property such as bank accounts, stocks, and bonds belonging to a non-resident is exempt even if held at a Pennsylvania institution.⁴

Deadlines and the Early-Payment Discount

The tax is technically due immediately upon death and becomes delinquent nine months later. That nine-month mark is the practical filing deadline.¹

Pay within three months of the date of death and the state gives a 5% discount on the amount paid during that window.¹⁰ On a $200,000 taxable inheritance at the 4.5% rate, that’s $450. You can make an early payment even if the final return isn’t ready; the discount applies to whatever portion you pay within the window.

Miss the nine-month deadline and interest starts running on the unpaid balance. The rate is set periodically by the Department of Revenue and published in Form REV-1611. Interest and penalties compound after that, so delay has no upside.

Once the Department of Revenue processes the return, it issues a Notice of Appraisement confirming the reported values and tax calculations or detailing any additional tax or interest owed. Hold onto the return, appraisals, balance statements, receipts for deductible expenses, and proof of payment. Those records are your defense if the state later questions a valuation or deduction.

1
Commonwealth of Pennsylvania. Inheritance Tax
2
Pennsylvania General Assembly. Pennsylvania Code Title 72 PS Taxation and Fiscal Affairs 9116
3
Internal Revenue Service. What’s New – Estate and Gift Tax
4
Pennsylvania General Assembly. Pennsylvania Code Title 72 PS Taxation and Fiscal Affairs 9111
5
Pennsylvania Department of Revenue. What Are the Requirements to Qualify for the Family-Owned Business Exemption From Inheritance Tax
6
Pennsylvania Department of Revenue. Who Qualifies for the Business of Agriculture Exemption From Inheritance Tax
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Pennsylvania Department of Revenue. What Is the Family Exemption for Inheritance Tax
8
Pennsylvania Department of Revenue. REV-1500 Inheritance Tax Return Resident Decedent
9
Pennsylvania Department of Revenue. REV-1737-A Inheritance Tax Return Nonresident Decedent
10
City of Philadelphia. File and Pay Inheritance Taxes