Pennsylvania Estate Taxes

Pennsylvania has an inheritance tax in addition to its estate tax that is intended to absorb the difference between the inheritance tax and the maximum credit against the federal estate tax (i.e., a "pick-up tax"). The amount of inheritance tax imposed depends on who gets what, according to the following classes of beneficiaries:

• Surviving spouse: Transfers of property to or for the use of a decedent's surviving spouse are completely exempt from Pennsylvania inheritance tax.
• Class A: After a $3,500 family exemption, transfers to the following beneficiaries are taxed at the rate of 4.5 percent: grandparents; parents (except that transfers from a child 21 years of age or younger are tax-exempt); lineal descendants (includes biological children, adopted children, and step-children, as well as their descendants); and the wife or widow and husband or widower of a child.
• Class A1: Transfers to siblings, related to the decedent by blood or adoption, are taxed at the rate of 12 percent.
• Class B: A transfer to anyone not listed above is taxed at a rate of 15 percent. However, transfers for public, government, charitable, and religious use are exempt from inheritance tax.

As far as estate taxes go, Pennsylvania's estate tax laws conform with the federal estate tax law amendments made by the Economic Growth and Tax Relief Reconciliation Act of 2001, which entirely phased out the state death tax credit from 2005 through 2010.

Deductions. The following items can be deducted from a decedent's estate when calculating Pennsylvania estate tax liability:

• decedent's debts and liabilities
• reasonable and customary funeral expenses, including bequests or devises for religious services, for the care of burial lots, and the erection of monuments
• administration expenses
• executors' and administrators' commissions
• attorneys' fees
• family exemption
• taxes for which the decedent is personally liable or which are imposed against property constituting part of the decedent's estate
• state and foreign death taxes required to be paid in order to bring assets into Pennsylvania or to transfer them to the new owner

Returns. If the decedent was a resident of Pennsylvania at the time of death, the Pennsylvania Inheritance Tax Return (Form REV-1500) must be filed in duplicate with the Register of Wills in the county where the decedent was a resident. If the decedent was a non-resident of Pennsylvania, the return should be filed in duplicate with the Register of Wills that issues Letters Testamentary or Letters of Administration, if any. Otherwise, the inheritance tax return is filed with the Department of Revenue, Bureau of Individual Taxes, Inheritance Tax Division, Dept. 280601, Harrisburg, PA 17128-0601.

Any returns and tax payments owed are due within nine months of the decedent's death.

Generation-skipping transfer tax. Pennsylvania does not impose this type of tax.