What Assets Are Subject to PA Inheritance Tax?

Almost everything a Pennsylvania resident owned at death counts among the assets subject to PA inheritance tax, from the house and bank accounts down to the car in the driveway and the furniture inside it. The tax starts at the first dollar — there is no large exemption threshold like the federal estate tax — and the rate depends on who inherits, not how much they inherit. A handful of categories escape the tax entirely, and the rules around jointly held property, pre-death gifts, and retirement accounts catch many families by surprise.

The Default Rule: If the Decedent Owned It, It’s Taxable

Pennsylvania taxes the transfer of almost all property a decedent owned. That includes:

Real estate: homes, land, rental properties
Bank accounts of every type
Stocks, bonds, mutual funds, and other brokerage holdings
Tangible personal property such as vehicles, jewelry, art, and household furnishings
Business interests, whether a sole proprietorship, partnership, LLC, or closely held corporation¹

For a Pennsylvania resident, the tax reaches all intangible property wherever it sits. Stocks held in a New York brokerage account or a bank account in another state are still taxed by Pennsylvania. Tangible property and real estate are taxable in Pennsylvania only if physically located within the state.

If the person who died lived outside Pennsylvania but owned real estate or tangible personal property here, that in-state property is subject to the tax. Intangible assets like out-of-state bank accounts and investments generally are not taxable for non-residents.

How Much Tax: Rates by Relationship

The rate turns entirely on the relationship between the decedent and the person inheriting:

0% to a surviving spouse, or to a parent from a child aged 21 or younger
4.5% to direct descendants and lineal heirs (children, grandchildren, parents, grandparents)
12% to siblings
15% to everyone else — nieces, nephews, friends, unmarried partners, cousins, and any heir not listed above — except charities and government entities, which are exempt¹

There are no brackets. If you inherit $500,000 from a sibling, the tax is a flat 12% on the full amount after allowable deductions.

Jointly Owned Property

Property owned jointly between spouses is completely exempt, however it is titled — real estate, bank accounts, and investment accounts held as joint tenants with right of survivorship or as tenants by the entireties all pass tax-free.¹

Joint ownership between people who are not married is treated very differently. When two non-spouses hold property as joint tenants with right of survivorship, the decedent’s share passes to the survivor and is taxed at the rate matching their relationship. If property is held as tenants in common, only the decedent’s proportionate share is taxable. Two siblings owning a property equally as tenants in common? When one dies, half the value is taxed at the 12% sibling rate.

Gifts Made Before Death

Pennsylvania reaches back to capture certain pre-death transfers. Any gift made within one year of death is subject to inheritance tax to the extent total gifts to a single recipient during that calendar year exceed $3,000.² That $3,000 figure is set by Pennsylvania statute and is not the federal gift tax annual exclusion ($19,000 per recipient in 2026). A $10,000 gift to a niece seven months before death would mean $7,000 taxed at 15%.

Property transferred before death is also taxable if the decedent kept a life interest in it. A parent who deeds a house to a child but keeps living there rent-free has retained the use of the property, and its full value is pulled back into the taxable estate.

What’s Exempt

Life Insurance

Proceeds from a life insurance policy are exempt whether paid to a named beneficiary or to the decedent’s estate.³ Pennsylvania is broader than many states on this point — proceeds paid to the estate keep their exemption.

Retirement Accounts

IRAs and 401(k)s are the single biggest source of confusion. If the decedent was 59½ or older at death, the full value of the account is taxable. If the decedent was under 59½, only the contributions portion is taxable; the earnings portion is exempt because those earnings would have been subject to a federal early-withdrawal penalty.⁴

For 401(k) plans, the analysis turns on whether the decedent had the right to terminate the plan during their lifetime. In most plans that right doesn’t exist until the plan’s normal retirement age, usually 62 or 65. If the decedent hadn’t reached that age and couldn’t access the funds without penalty, the same partial-exemption logic applies. One counterintuitive wrinkle: if the decedent was disabled at the time of death, retirement accounts are fully taxable regardless of age.⁴

Spousal and Young-Child Transfers

Everything passing to a surviving spouse is taxed at 0%. The same 0% rate applies to transfers from a child aged 21 or younger to a parent.¹

Charities and Government Entities

Transfers to qualified charitable organizations, exempt institutions, and government entities are not subject to inheritance tax.

Family Farmland

Agricultural land transferred to family members is exempt if the property generates at least $2,000 in gross income annually and continues to be used for agriculture for seven years after the decedent’s death. “Family members” is defined broadly, reaching well beyond children to include spouses, siblings, parents, grandparents, aunts, uncles, cousins, and their descendants.¹

Qualified Family-Owned Businesses

A family business interest can be exempt if it meets all of these conditions: fewer than 50 full-time equivalent employees, net book value of assets under $5 million, in existence for at least five years before the decedent’s death, and its principal purpose is not managing investments or income-producing assets. After the transfer, a qualified family member must continue to own the business for at least seven years and file an annual certification with the Department of Revenue during that period. The exemption must be claimed on an inheritance tax return filed within the normal deadline.⁵

Military Deaths

Personal property transferred from the estate of a military member who died from an injury or illness sustained while on active duty is exempt for deaths occurring after September 6, 2022.

Deductions That Shrink the Taxable Amount

Assets are valued at fair market value as of the date of death. Pennsylvania does not offer an alternate valuation date the way the federal estate tax does, so there is no option to use a value six months later if the estate has declined.⁶

Several categories of expenses reduce the taxable amount: funeral and burial costs (including the plot and headstone), administrative expenses like attorney fees and executor commissions, and debts the decedent owed at death, such as mortgages, outstanding loans, and credit card balances.⁷

The Deadline and the 5% Early-Payment Discount

Payment becomes delinquent nine months after the date of death, and missing that date triggers interest on the unpaid balance. Pay within three months of the date of death, though, and the estate gets a 5% discount on the tax owed.¹ On a $100,000 tax bill, that’s $5,000 saved. Executors who know about the discount early can pay quickly using estimates and file a supplemental return to true up the numbers later.

1
Commonwealth of Pennsylvania. Inheritance Tax
2
Pennsylvania General Assembly. Act of Aug 4 1991 PL 97 No 22 – Section 36
3
Pennsylvania Code and Bulletin. 61 Pa Code 93.131 – Payments From Employment Benefit Plans and Life Insurance Contracts
4
Pennsylvania Department of Revenue. Is a Decedents IRA or 401K Subject to PA Inheritance Tax
5
Pennsylvania Department of Revenue. Inheritance Tax Q and A
6
Pennsylvania Department of Revenue. REV-1500 Inheritance Tax Return
7
Pennsylvania Department of Revenue. REV-720 Inheritance Tax General Information