Pennsylvania Death Taxes Won’t Die
“Nothing is certain except death and taxes.” Benjamin Franklin wrote this in a letter to French scientist Jean-Baptiste LeRoy in 1789. More than two centuries later, in the Commonwealth of Pennsylvania, nothing is more certain than death taxes. Pennsylvania established a death tax, or an “inheritance tax,” in 1826. It was the first of its kind in the United States.
In 2025, Pennsylvania is one of six states that have an inheritance tax. Inheritance taxes are payable by a beneficiary of a bequest and are based on the amount distributed to that beneficiary and that beneficiary’s tax rate. Twelve states and the District of Columbia have an estate tax, wherein the decedent’s estate is taxed before assets are distributed to the heirs. One state, Maryland, has both an estate tax and an inheritance tax.
Pennsylvania has four different inheritance tax rates:
- 0% to a surviving spouse or to a parent from a child aged 21 or younger;
- 5% to direct descendants and lineal heirs, e.g., children or grandchildren;
- 12% to siblings; and
- 15% to all other heirs, except charitable organizations and tax-exempt entities.
Pennsylvania inheritance tax is due upon death of the decedent and becomes delinquent nine (9) months after the decedent has died. A five (5) percent discount is available on any inheritance tax payments made within three (3) months of the decedent’s death.
When a person who is domiciled in Pennsylvania dies, most, but not all, of his assets are subject to Pennsylvania inheritance tax. There are a few enumerated exemptions. For example, life insurance proceeds and property owned jointly between spouses are not subject to Pennsylvania inheritance tax. Most other assets, regardless of whether or not they pass through the probate process, are subject to inheritance tax. For example, your father dies and you are named as the beneficiary of his IRA. That asset does not pass through probate—it passes directly to you—but you still must pay inheritance tax on the asset at 4.5%.
According to the Tax Foundation, a 501(c)(3) nonprofit whose mission is “to improve lives through tax policies that lead to greater economic grown and opportunity,” inheritance and estate taxes “hurt a states’ competitiveness and create incentives to avoid paying them, especially for wealthy taxpayers.” Furthermore, inheritance taxes can be viewed as double-taxation because the bequest was already subject to individual income tax before inheritance tax was levied.
Over the past few years, there have been measures by elected officials to curb or eliminate the inheritance tax. In 2021, late Pennsylvania Representative Anthony DeLuca (D) introduced House Bill 558 to create a floor for inheritance tax that would exempt the first $100,000 of an estate from inheritance tax. Also in 2021, Pennsylvania Representative Valerie Gaydos (R) introduced House Bill 1148 to eliminate inheritance tax entirely. Neither bill gained any meaningful traction, but there has been a recent resurgence. In December 2024, Representative Anita Kulik (D) introduced House Bill 105 to exempt the first $100,000 of an estate from inheritance tax. And just this month, Representative Gaydos reintroduced House Bill 1394 that would eliminate the Pennsylvania inheritance tax altogether. It seems that Democrat and Republican officials alike agree that at least part of a person’s estate should be exempt from inheritance taxes. But passing such a bill would force Pennsylvania’s government to become more efficient or make up for the revenue in another way. As of December 31, 2024, year-to-date total nonresident and resident estate and inheritance taxes collected in Pennsylvania amounted to more than $839 million.
Unfortunately, Pennsylvania inheritance tax won’t die anytime soon. That is why it is best to consider inheritance taxes in your estate plan. If you want help with estate planning in Western Pennsylvania, I can help you. Please contact me to set up a consultation.
