Pennsylvania Inheritance Tax on an Inherited House
By Marty Pottinger, Realtor®, Certified Probate Specialist |
When a house passes to family in Pennsylvania, one of the first surprises for many heirs is the state inheritance tax. Pennsylvania is one of the few states that still has one, and it applies to real estate as well as bank accounts and other property. The good news is that the rules are fairly clear once you see them laid out. Here is a plain-language walk-through for executors, administrators, and heirs.
What the tax is
According to the Pennsylvania Department of Revenue, inheritance tax is imposed as a percentage of the value of a decedent's estate that passes to beneficiaries under a will, to heirs when there is no will, and to people who receive property by operation of law. The rate depends on the relationship between the person who died and the person receiving the property.
For most families, the house is the largest single item in the estate, so it often drives most of the tax.
Current Pennsylvania inheritance tax rates
As published by the Department of Revenue, the rates are:
- 0 percent on transfers to a surviving spouse, or to a parent from a child aged 21 or younger
- 4.5 percent on transfers to direct descendants and lineal heirs (for example, children and grandchildren)
- 12 percent on transfers to siblings
- 15 percent on transfers to other heirs, except charitable organizations, exempt institutions, and government entities that are exempt from tax
The Department also notes that property owned jointly between spouses is exempt. There are other specific exemptions, such as certain farmland transferred to eligible recipients and certain property of service members who died from an injury or illness received on active duty. If any of those might apply, ask your attorney or tax preparer.
Always confirm the rates on the Department of Revenue's inheritance tax page before you file, since tax law can change.
How the house is valued
The tax is based on the value of the property as of the date of death, not the price it eventually sells for months later. That is why a date-of-death value matters so much. Many estates use a written appraisal from a licensed appraiser for the tax return. A real estate agent's market analysis can help you understand the market and plan a sale, but your attorney or tax preparer should decide what support the return needs.
A simple example, using made-up round numbers only to show the math: if a house worth $200,000 at the date of death passes to the decedent's two children, the tax on the house at the 4.5 percent rate would be $9,000 before any discount, deductions, or other adjustments. Your actual numbers depend on the full return, including allowable debts and expenses.
When it is due, and the early-payment discount
The Department of Revenue explains that inheritance tax payments are due upon the death of the decedent and become delinquent nine months after the date of death. If the tax is paid within three months of the date of death, a 5 percent discount is allowed.
Nine months can go quickly when you are also clearing out a house, handling bills, and grieving. If the estate wants the discount, it helps to get a value for the house early and talk with the attorney soon after letters are granted.
The return itself is filed with the Register of Wills in the county where the decedent lived. You can find your county in the PA Courts Registers of Wills directory, or on my county resource map. For my home area, see the pages for Mercer, Butler, Lawrence, and Venango counties.
Who actually pays it?
The personal representative is responsible for filing the return and making sure the tax is paid out of the estate. Often the tax is paid from estate funds, and the will may say how taxes should be charged among the heirs. When an estate does not have much cash, selling the house is a common way to raise money for the tax, debts, and expenses. Pennsylvania law gives personal representatives the power to sell estate real estate in many situations, which I explain in my post on selling a house before probate closes.
Inheritance tax is not the same as income tax on a sale
These are two separate questions. Pennsylvania inheritance tax looks at the value of what passed at death. Any income tax on a later sale generally looks at the difference between the sale price and the property's tax basis, which for inherited property is often tied to the date-of-death value. That is another reason a solid date-of-death value is worth having. A CPA or tax preparer can tell you how this works for your estate.
A quick checklist for the house
- Get letters from the county Register of Wills so someone has authority to act for the estate.
- Get a date-of-death value for the house, in the form your attorney or tax preparer recommends.
- Decide early whether the estate wants to pay within three months to take the 5 percent discount.
- Mark the nine-month delinquency date on your calendar.
- Keep receipts for estate expenses such as repairs, utilities, insurance, and cleanout, and give them to the person preparing the return.
- If the house will be sold, plan the timeline so the sale and the tax filing support each other.
How I can help
I am a Certified Probate Specialist and a U.S. Army veteran, and I help families in Mercer, Butler, Lawrence, and Venango counties with inherited homes. I can give you a free, no-pressure value estimate for planning, connect you with local appraisers and cleanout help, and coordinate a sale with your attorney so the timing works for the estate.
If that would help, request a free home valuation or schedule an estate-sale consultation. You can also call me at 724-264-5274. My Pennsylvania probate guide covers the rest of the process step by step.
This article is general information, not legal or tax advice. I am a licensed real estate salesperson, not an attorney or tax advisor. Tax rates and rules can change, and every estate is different. Please confirm current rules with the PA Department of Revenue and talk with a Pennsylvania attorney or tax professional before you file or act.