Skip to Content

We are a Veteran Owned Business, providing 20% discounts for Veterans, First Responders, Elementary and High School teachers. Please contact us to set up a phone or Zoom meeting. Taking care of you and your family, It's What We Do!

Do I owe inheritance tax if my Mom transferred me her house before death?

Posted on Fri Mar 6, 2015, on Probate and Estate Administration

From our “Ask a Question” Mailbag: Transferred Property and Inheritance Tax in Chester County

Most Recently Updated July 10, 2018.

“My Mother transferred her Chester County home to me two years ago and has recently died. I am going to sell the house soon, but do I have to pay Pennsylvania Inheritance Tax?”

Transferred Property and Inheritance Tax in Chester County

Transferred Property and Inheritance Tax in Chester County

Not in your case. The Pennsylvania Inheritance Tax of 4.5% applies to: transfers to children at death and includes all gifts made within one year of the date of death. If the house was transferred properly into your name 2 years ago, it will not be subject to the Pennsylvania Inheritance Tax.

Step Up Basis

That being said, it will also not receive a Step-Up in basis. When a person dies, the basis that the heir receives in inherited property is the date-of-death fair market value. Let’s look at an example here, with the math explained below. In this case, let’s say the house was worth $250,000 at her death. If she had died owning the house and gave it to you through her will, you would have paid a 4.5% Inheritance Tax on the whole amount. However, when you sold the house at her death for $250,000 your basis would have been $250,000 and there would be no capital gains tax owed.

Transfer Basis

Because your mother gave you the house outright, two years prior, rather than leaving it to you in her will, you have Transfer Basis, meaning you have whatever basis she had in the house. If she paid $20,000 for the house this would mean that if you sell the house for $250,000 you have to pay capital gains taxes on $230,000. In that case, it would have been better to pay the 4.5% Inheritance Tax.

1) Taxes if Transferred at Death

  • Value of House = 250k
  • Mom’s Basis = 20k
  • Tax Owed = 250,000 x 4.5% = $11,250

2) Taxes if Transferred 2 Years Prior

  • Value of House = 250k
  • Mom’s Basis = 20k
  • Amount Subject to Capital Gains = 250,000 – 20,000 = $230,000
  • *Tax Owed (15%) = 230,000 x 15% = $34,500
  • **Tax Owed (20%) = 230,000 x 20% = $46,000

* Capital gains rate is dependent on regular income tax rate. For 2015, 15% is for those earning ordinary income from ($37,450 to $413,200 per year) and 20% rate is for those earning over $413,200 per year. As you can see, transferring property prior to death creates a larger tax burden in this hypothetical.

More Probate Questions?

Transferred Property and Inheritance Tax in Chester County is only part of the overall probate process. By all means, if you wish to learn more, please read my more detailed article, The Probate Process All You Need to Know.

In Conclusion: Transferred Property and Inheritance Tax in Chester County

I hope that this article was helpful in explaining transferred property and Inheritance Tax in Chester County. Further, I included links to even more detailed information on my website. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!

Let our Probate Lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced Probate Attorneys.  By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do

Tags:

Chester County, Death taxes, Inheritance Tax, Pennsylvania, Probate, Probate Attorney, Probate Lawyer

Peter KlenkPeter Klenk

What Our clients are saying

Klenk Law Logo
Stars

Anne W.

I saw four lawyers and was told by all of them; I should just forget contesting my mother's will. I knew what happened, but it is very hard to prove undue influence. I contacted the Law Offices of Peter L. Klenk & Associates. Attorney Amanda DiChello took my case. They were very honest and upfront about what would be involved trying to prove what I knew was true. Attorney DiChello may be young but she is extremely knowledgeable and skilled. She listened and understood what I conveyed to her. She knew exactly what information to use and crafted an outstanding interrogatory and many powerful depositions. Attorney DiChello understood the various emotional feelings this case created for my family and me; she was always there for us with a kind and encouraging word. We went to trial. The amount of work which she and her Paralegal did for the trial was incredible. They both knew my case inside and out! Attorney DiChello's powerful interrogative and thinking skills produced a positive outcome. Attorney DiChello did what other seasoned lawyers said was impossible!

Klenk Law Logo
Stars

Glenn P.

Peter Klenk ESQ is a thoughtful and capable attorney who we work with on estate planning issues. His firm recently provided us with new Wills, Power of Attorneys and our instructions regarding major health issues. These documents are important for estate and life planning. Peter and his team are masters in the complexities of Estate Law. We highly recommend Peter and his Associates to provide thoughtful advice and outstanding work on these complex issues of the law. Make sure your estate planning documents are up to date, and Peter can be relied on to do an excellent job. Well done Peter!

Klenk Law Logo
Stars

Nafeesha. B

When it came down to picking the right attorney to handle my affairs, I knew right away it was this firm. From speaking to their secretary to speaking to Peter I knew I was making the right decision. After only a few mins Peter knew right away what I was looking for and handled all my questions professionally and even gave me great feedback that put my mind at ease. All that without even giving a single penny! So of course I hired him! So far so good...

Klenk Law Logo
Stars

Michael Patete

Surprisingly easy

Klenk Law Logo
Stars

MJG

Affable...yet surprisingly cerebral estate planning atty. High marks all the way around.

Let us put our expertise to work for you.

Free consultation within 24 hours.