Klenk Law

Is there a limit on the PA Inheritance Tax?

Posted on Thu Nov 13, 2014, on Probate and Estate Administration

Each Pennsylvania estate is subject to two potential estate related taxes; the Pennsylvania Inheritance Tax and the Federal Estate Tax. When you mention a “limit”, you are speaking about the Federal Estate Tax, not the Pennsylvania Inheritance Tax.

The Federal Estate Tax exempts the first $5,000,000.00 (adjusted for inflation) of each estate from taxation. This means that if the estate’s value is under $5,000,000.00 there is no Federal Estate Tax due.

For the Pennsylvania Inheritance Tax, there is no “limit”. If the estate even has $1.00 a tax is due. The tax is levied on the “net value” of the estate, which is the fair market value of all assets less liabilities. The amount of the tax depends on the recipient. For example, if the beneficiary is a child, the tax rate is 4.5% of the net estate value, but if the beneficiary is a sibling, the tax rate is 12%.

There are some subtleties to the taxes, such as that life insurance proceeds are not taxed by Pennsylvania, but they are subject to the Federal Estate Tax. If you are not familiar with these taxes, you are well advised to retain an experienced Probate Attorney to help you prepare and file the return. As a bonus, the cost of your attorney is deductible against both the Pennsylvania Inheritance Tax and the Federal Estate Tax!

If you have questions about probate in Philadelphia County, Pennsylvania, feel free to contact our office for a free consultation.
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