Inheritance tax rules and regulations can be complex and even vary from state to state. If you’re wondering, “What is the inheritance tax in PA?” an attorney is your best resource for understanding the different rates and which assets may be exempt from taxation.
In this blog post, we’ll provide an overview of the basic information you need to know about inheritance tax in Pennsylvania.
Understanding the PA Inheritance Tax
Many people misinterpret inheritance tax laws, which can lead to feeling uneasy about what to expect after a loved one passes. An attorney can help you better understand your role, responsibilities, and ways to handle inheritance tax.
Before consulting an attorney, review these features about what is inheritance tax in PA today.
Planning for Inheritance Taxes
Individuals and families can create an estate plan to lessen the impact of inheritance tax. This may include strategies such as gifting assets during their lifetime, organizing trusts, and taking advantage of the available tax deductions and exemptions.
When considering a plan for inheritance tax, review the following features:
- Tax rates on inherited assets
- Available exemptions and deductions
What Is the Inheritance Tax in PA?
According to the Pennsylvania Department of Revenue, inheritance tax is an imposed percentage of the value of a decedent’s estate transferred to beneficiaries by will, heirs, and operation of law. The rate rate may vary depending on the relation of the heir to the decedent.
Pennsylvania inheritance tax rates are as follows:
- 0 percent on transfers to a surviving spouse or parent of a child 21 years or younger
- 4.5 percent on transfers to direct descendants and lineal heirs
- 12 percent on transfers to siblings
- 15 percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax
Payments are due upon the death of the decedent and become errant nine months after the individual’s death. If inheritance tax is paid within three months of the decedent’s death, a 5 percent discount may be applied.
Determining Inheritance Tax for Assets
If property and assets are located in Pennsylvania, they’re subject to inheritance tax, including:
- 401k
- Annuities
- Antiques
- Bank accounts
- Bonds
- Cars
- Cash
- Furniture
- IRA accounts
- Jewelry
- Stocks
Assets Exempt From Inheritance Tax
Spouses who had jointly owned property are exempt from inheritance tax, including farmland and other agriculture areas.
Personal property transferred from the estate of a serving military member who has died from an injury or illness while on active duty in the armed forces, a reserve component, or the National Guard, is exempt from inheritance tax.
There are additional exceptions to taxes on some assets and property, such as:
- IRA accounts if the individual who died had not reached the age of 59 and a half
- Life insurance proceeds paid to a beneficiary
Filing a Tax Return
The executor of the deceased person’s estate may be responsible for filing tax returns and paying any inheritance tax owed.
If you are planning to file a PA inheritance tax return, you will need to complete a REV-1500 form provided by the PA Department of Revenue.
A personal representative has nine months from the deceased person’s date of death to file and pay the inheritance tax return. There is a 25 percent tax penalty or $1,000 (whichever amount is less) for a missed deadline.
Additionally, if you prepay the inheritance tax within three months of a person’s passing, then you receive a 5 percent tax discount on the tax due.
A person’s eligibility for exemptions can vary based on a number of factors. Reach out to an attorney to better understand inheritance tax regulations.
Your Legal Team at Auld Brothers Law
What is the inheritance tax in PA? There are varying percentages and laws surrounding inheritance tax in Pennsylvania, which is why you should consult with an attorney to better understand inheritance tax in relation to your unique circumstances. That way, you can make the most knowledgeable choices for you and your family.
The legal team at Auld Brothers Law will work with you to help you understand your options. As a fourth-generation law firm, we are committed to aiding individuals and families in our community.
We are here to assist you in designing, managing, and preserving your current and future assets while carefully guiding you through legal processes. Auld Brothers Law can educate and help you throughout the inheritance tax process, from determining assets and deductions to reviewing documentation for accuracy and completing a return.
Our goal is to help ease the processes during a challenging time as you complete your legal responsibilities. Schedule your free consultation with Auld Brothers Law today.