Pennsylvania Inheritance Tax: Rates and Exemptions

In Pennsylvania, almost every inheritance gets taxed, and there is no relationship-blind exemption threshold to hide behind.1

What changes the bill is not the size of the inheritance but who receives it. A child pays one rate, a sibling pays nearly triple, and a friend pays more than that. This guide lays out exactly who owes the Pennsylvania inheritance tax and what each relationship pays, from the first dollar.

In This Guide

• Pennsylvania Inheritance Tax at a Glance
• Inheritance Tax vs. Estate Tax
• How the Pennsylvania Inheritance Tax Works
• The Rates by Relationship
• What About Medicaid Estate Recovery?
• Frequently Asked Questions
• Next Steps

Pennsylvania Inheritance Tax at a Glance

Here is the short version. Pennsylvania does not tax your estate. It taxes the people who inherit from you, and the rate depends entirely on how they were related to you.

There is no relationship-blind exemption threshold the way there is in some states.1 The tax applies from the first dollar inherited. A surviving spouse is taxed at 0 percent, and so is a transfer between a parent and a child aged 21 or younger, in either direction: a parent inheriting from such a child pays nothing, and a child of 21 or younger inheriting from a parent pays nothing either.1 Everyone else pays something, scaled by relationship: closer relatives pay less, more distant heirs pay more.

That is the core of the Pennsylvania inheritance tax. It is broad, it is flat within each relationship class, and there is no relationship-blind exemption to chip away at it. What exemptions exist are tied to specific transfers rather than to a dollar threshold, and they are listed below.

Inheritance Tax vs. Estate Tax

People mix these up all the time, and the difference decides who actually pays.

An estate tax is paid by the estate before anyone inherits, and the size of the estate is what triggers it. An inheritance tax is paid by the heir, and what triggers it is the heir's relationship to the person who died.1 Two heirs splitting the same estate can owe very different amounts, because one was a son and the other was a nephew.

Pennsylvania's estate tax exists, but almost no ordinary estate ever meets it. It is a pick-up tax rather than a tax of its own. Under 72 P.S. section 2117 it is imposed only where a federal estate tax is payable on the estate of a Pennsylvania resident and the inheritance tax actually paid to the Commonwealth is less than the maximum credit for State death taxes allowable under section 2011 of the Internal Revenue Code of 1986, and it equals that difference.1 Both conditions have to hold. So for practical purposes the inheritance tax is the death tax a Pennsylvania family deals with, but "Pennsylvania has no estate tax" is not quite what the statute says, and an estate large enough to owe federal estate tax should have the section 2117 calculation done rather than assumed away.

And the federal government has no inheritance tax at all. It has only an estate tax, and that one reaches so few estates that most families never encounter it. So for a Pennsylvania death, the state inheritance tax is almost always the only death tax that matters.

How the Pennsylvania Inheritance Tax Works

The tax assigns a flat rate to each beneficiary based on their relationship, and it applies to the value they inherit with no relationship-blind exemption to subtract first.1

A surviving spouse inherits at 0 percent. Direct descendants and lineal heirs, such as children, grandchildren, parents, and grandparents, pay 4.5 percent, and so does a son- or daughter-in-law. Siblings pay 12 percent. Anyone outside those groups pays 15 percent.1 Because there is no relationship-blind exemption, a small inheritance is taxed just like a large one, at the same percentage.

Several carve-outs sit outside that rate ladder, and they are worth reading closely because families miss them.

• Transfers between a parent and a child aged 21 or younger are taxed at 0 percent in either direction, the same as a spouse.1
• Transfers to charitable organizations, exempt institutions and government entities are exempt from the tax entirely.1
• Property owned jointly between spouses is exempt from inheritance tax.1
• Certain farm land and other agricultural property is exempt, for estates of decedents dying after June 30, 2012, provided the property is transferred to eligible recipients.1
• Personal property transferred from the estate of a serving military member who died as a result of an injury or illness received while on active duty in the armed forces, a reserve component or the National Guard, is exempt, for estates of decedents dying on or after September 6, 2022.1

Outside those cases, the relationship-based rate applies from the first dollar. If a farm is part of the estate, or the deceased was a service member who died of a service-related injury or illness, get the exemption checked before anyone pays a bill.

Put a number on it. Say a parent leaves $200,000 split evenly between a daughter and a sibling of the deceased. The daughter, a lineal heir, owes 4.5 percent on her $100,000, or $4,500. The sibling owes 12 percent on the same $100,000, or $12,000. Same estate, same amount inherited, nearly three times the tax, purely because of the relationship.1

The inheritance tax return is filed and paid through the Pennsylvania Department of Revenue. The estate's executor typically files it, though the tax legally falls on what each beneficiary receives.

The Rates by Relationship

A few points the table makes clear.

A surviving spouse pays nothing. Transfers to a spouse are taxed at 0 percent, so a husband or wife inherits free of Pennsylvania inheritance tax.1

Children and lineal heirs pay 4.5 percent. This is the rate for direct descendants and lineal relatives, including children, grandchildren, parents, and grandparents. The same rate covers a son- or daughter-in-law, meaning the husband, wife, widow, or widower of a child.1 For most families, where assets pass down to children, 4.5 percent is the number that matters.

Siblings pay 12 percent. A brother or sister inheriting is taxed at more than double the lineal rate.1

Everyone else pays 15 percent. Nieces, nephews, cousins, friends, and unrelated heirs fall into the top rate.1

Because there is no relationship-blind exemption threshold, relationship is the main lever.1 The same $50,000 is taxed at 4.5 percent for a child, 12 percent for a sibling, and 15 percent for a friend.

What About Medicaid Estate Recovery?

This is a separate process that people often confuse with the inheritance tax, so it is worth keeping straight.

If the person who died received certain long-term-care benefits through Medicaid, the state may seek repayment from their estate after death. That is Medicaid estate recovery, and it is not a tax. It is the state recouping what it spent on someone's care, and it can shrink or erase what heirs receive before the inheritance tax question even arises.

Both can touch the same estate, but they answer different questions. The inheritance tax depends on who inherits; estate recovery depends on what care the deceased received. If you are settling an estate where the person was on Medicaid, treat them as two separate matters.

Next Steps

The planning lesson in Pennsylvania is that there is no threshold to plan under. The only real variable is who inherits.

• Know each heir's rate. Lineal heirs pay 4.5 percent, siblings 12 percent, others 15 percent, and a spouse pays nothing.
• Coordinate with the estate plan. How assets are titled and whether they pass through the estate affects what gets taxed. A Pennsylvania estate attorney can run the numbers.
• Separate the tax from estate recovery. If Medicaid paid for care, handle that claim on its own.

For families weighing how an inheritance fits into paying for a parent's care, our guides on building a senior care funding plan and selling or renting a home for care cover the money side in plain language.

Learn More

Find personalized help understanding how an inheritance affects your family's care plan at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.