Do I Have to Pay Pennsylvania Inheritance Tax if My Relative Lives in Another State?

Inheritance taxes are payable to the state where a decedent lived and died. Only seven states have inheritances taxes, but Pennsylvania is one of them. You won't pay it just because you live there, and you won't pay it if your relative didn't reside in the state. You might receive a tax bill if he left you property located in Pennsylvania, however.

Pennsylvania Inheritance Tax

Inheritance tax is a levy on your right to receive your relative's property after his death. Pennsylvania charges this tax on all real and tangible property owned by a decedent who lived there, as well as all real and tangible property physically located within the state at the time of his death. Therefore, if your relative leaves you acreage in Pennsylvania, or if he leaves you an investment account held by a Pennsylvania financial institution, the tax would come due, even if he lives in Massachusetts. An exception is life insurance proceeds, which the state typically doesn’t tax.

Relationship to the Decedent

Spouses who inherit, as well as a decedent's children under 21, don't have to pay inheritance tax in Pennsylvania. Everyone else pays it on a sliding scale, depending on how closely related they were to the decedent. More distant relatives such as aunts, uncles and cousins pay 15 percent of the value of their inheritance. If your deceased relative was your parent, grandparent or child, you'll pay only 4.5 percent. If he was your sibling, the rate is 12 percent.

Reducing the Tax

Pennsylvania lets you shave a little off any inheritance tax you owe, but you may be at the mercy of the estate's executor to take advantage of the opportunity. Inheritance tax returns are due nine months after the date of death. If you file the return and pay the tax within three months, you can take 5 percent off what you owe. However, the executor of an estate typically files the inheritance tax return – not the recipient of the bequest – and it includes everyone's inheritance, not just yours. The return is complicated and may take some time to prepare properly, so the three-month deadline might be tough to meet. The good news is that it's possible the executor will pay the inheritance tax for all beneficiaries out of the estate's funds – you won't have to come up with the money yourself – so the 5 percent reduction or lack of it might not affect you personally.

Income Tax

Income tax is a separate issue, but you probably won't incur it, regardless of where your relative lived or owned property. Pennsylvania does not levy a state income tax on most inheritances, and the federal government doesn't either.

About the Author

Beverly Bird has been writing professionally for over 30 years. She specializes in personal finance, divorce and family law, bankruptcy, and estate law, and she writes as the tax expert for The Balance. She is the author of more than 30 novels.

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