How much is Pennsylvania inheritance tax on an inherited house?

The Pennsylvania Department of Revenue lists the rates this way: 0 percent on transfers to a surviving spouse, or to a parent from a child age 21 or younger; 4.5 percent on transfers to direct descendants and lineal heirs; 12 percent on transfers to siblings; and 15 percent on transfers to other heirs. Charities, exempt institutions and government entities are exempt. So a child who inherits a house pays at the 4.5 percent rate on the value of that share, while a nephew or a friend pays 15 percent.

The department says property owned jointly between spouses is exempt from inheritance tax. If the house was held jointly by a married couple, the surviving spouse generally does not owe this tax on it. If the house was in the decedent's name alone, the rates above apply to whoever receives it. Check how the deed is titled before assuming anything.

Suppose a house is valued at a number your attorney or appraiser sets, and it passes to one adult child. The tax is that value multiplied by 4.5 percent. If it passes to a sibling, it is multiplied by 12 percent. If the house is split between a child and a nephew, each share is taxed at its own rate. Because the estate's personal representative files the return, ask your estate attorney how the value will be set and how the tax is paid. The share matters as much as the rate. If three siblings inherit equally, each sibling's third is taxed at the sibling rate, not the child rate, when the person who died was a brother or sister. If a parent leaves the house to two children and a grandchild, the rate for each share follows each person's relationship to the parent. Ask the attorney to show the math for each beneficiary in writing. That way the family can see how the tax affects what each person nets from a sale.

Inheritance tax is not the only tax in play. Pennsylvania inheritance tax is charged on what an heir receives, and the rates depend on the relationship. Realty transfer tax is charged on a deed, and the exemptions for passing property by will or intestacy do not cover a later sale to a buyer. Income tax on a gain is a federal and state question. For federal income tax, the IRS says inherited property generally takes a basis equal to fair market value at the date of death. Ask your estate attorney and a tax professional which of these apply to your house, in what order, and who will file each return. Do not assume that paying one tax settles the others.

Inheritance tax is separate from income tax and from the transfer tax paid when a house is sold. If heirs do not want to keep the property, selling can raise the cash to pay the tax and split the rest. Kaizen Home Buyers makes as-is cash offers with no repairs and no agent commission, usually within 24 hours, and can close in 14 to 30 days or on your date. Call 267-329-0084. An estate attorney or tax professional can tell you what the estate owes.