Pennsylvania does not have an estate tax. No matter the size of the estate, it will owe nothing to the state of Pennsylvania before the money is dispersed to heirs. There is a federal estate tax that may apply, and Pennsylvania does have an inheritance tax. If you think you might need help with estate planning or financial planning more generally, SmartAsset’s financial advisor matching tool can help you find an advisor in your area.
Pennsylvania Estate Tax
Pennsylvania is one of 38 states with no estate tax.
What Is the Estate Tax?
The estate tax is charged on the estate of a recently deceased person. The money is taken after the person has died but before the money is dispersed to their heirs. It is sometimes called the “death tax.”
The estate tax is different from the inheritance tax. Inheritance taxes are taken from a person’s heirs after the inheritance has already been passed on.
Pennsylvania Inheritance Tax and Gift Tax
Though there is no estate tax, there is an inheritance tax in Pennsylvania. The percentage paid depends on the relationship between the heir and the decedent.
No tax is applied to transfers to a surviving spouse or to a parent from a child under the age of 21. There is a 4.5% tax applied to transfers to direct descendants and other lineal heirs like grandchildren. There is a 12% tax on transfers to siblings and a 15% tax on transfers to any other heir, with the exception of charitable organizations, exempt institutions and government entities that don’t pay tax.
The Pennsylvania estate tax is owed by out-of-state heirs for real property and tangible personal property located in the Keystone State.
There is no gift tax in Pennsylvania. The federal gift tax applies to gifts of more than $14,000 in 2017 and more than $15,000 in 2018.
Federal Estate Tax
No estate will have to pay estate tax from Pennsylvania. There is still a federal estate tax. The federal estate tax exemption is $11.18 million in 2018, which is an increase from $5.49 million in 2017. This exemption is portable. This means that with the right legal maneuvering a married couple can protect up to $22.36 million after both spouses have died.
If an estate exceeds that amount, the top tax rate is 40%. A full chart of federal estate tax rates is below.
Here’s how it works. Let’s say your estate is worth $21.18 million and you aren’t married. Subtracting the exemption of $11.18 million, creates a taxable estate of $10 million. Consulting the chart, you are in the top bracket. The base tax payment on the first $1 million is $345,800. The top rate of 40% applies to the remaining $9 million, which comes to $3.6 million. That sum is added to the base taxes of $345,800, meaning the total federal estate tax burden is $3,945,800.
|FEDERAL ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the exemption of $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Pennsylvania Tax Picture
Pennsylvania is a tax-friendly state for retirees. Social Security is not taxed, and neither are pensions or withdrawals from retirement accounts. Pennsylvania’s income tax rate is a flat rate of 3.07%, and local income taxes range from 0% to 4%. Effective property tax rates in Pennsylvania range from 0.9% to 2.5%. You can use this Pennsylvania paycheck calculator to calculate what your take home pay will be.
The sales tax in the Keystone State is 6% across the state with two exceptions. There is an additional 1% sales tax charged in Allegheny County (including Pittsburgh) for a total of 7% and a 2% surcharge in Philadelphia for a total sales tax of 8%. The gas tax in Pennsylvania is the highest in the nation at 59.3 cents per gallon.
Estate Planning Tips
- If you’re planning an estate or just looking to get help with financial planning in general, a financial advisor can be a big help. SmartAsset has a financial advisor matching tool to make sure you find one who is a great fit for you and your needs. You’ll start by answering a few questions about yourself and your financial preferences. Our program will then match you with up to three advisors in your area who will get in touch with you. All of the advisors on the platform are free of disclosures and have been fully vetted.
- When planning an estate, it is important to know everything you have in your portfolio, including any retirement accounts. This 401(k) calculator can show you what your account might be like when you’re ready to go into your golden years.
- Planning an estate is not just for the old. In fact, you should start thinking about your estate plan when you’re younger, so that you will be prepared as you move into your later years.
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