Por Mariana Adorno
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In Pennsylvania, receiving an inheritance can mean paying a state tax whose rate varies depending on the legal or family relationship the beneficiary had with the deceased, but not all heirs are subject to the same obligations.
According to the Pennsylvania Department of Revenue, couples who are not legally married could face a 15% tax on inherited assets.
What does Pennsylvania’s Tax Code say about unmarried surviving partners?
In Pennsylvania, couples who are not legally married can be subject to a 15% tax on the value of inherited assets when one partner dies.
According to the Pennsylvania Department of Revenue, this tax rate applies to beneficiaries who do not fall into family categories.
As a result, living together for several years or being in a romantic relationship does not guarantee an exemption from the tax. However, the treatment may vary when there is a valid common-law marriage recognized under Pennsylvania law.
Common-law marriages: in what situations does Pennsylvania recognize this marital status?
According to the official instructions for Form REV-1500, Pennsylvania recognizes common-law marriages established through Jan. 1, 2005, as long as there is sufficient evidence.
What other tax rates are in effect depending on the legal relationship with the deceased?
The Pennsylvania Department of Revenue sets four inheritance tax rates, depending on the relationship between the beneficiary and the deceased:
- 0%: surviving spouses.
- 4.5%: direct descendants and other lineal relatives, such as adult children, grandchildren, parents and grandparents.
- 12%: siblings and half-siblings.
- 15%: other beneficiaries, including more distant relatives and people with no legal family connection.
These rates apply to the taxable value of transferred assets and not necessarily to the deceased person’s entire estate.
Other rules under Pennsylvania law: Who is exempt from the tax rates?
The rules include different exemptions that allow certain inherited assets to be received without paying the inheritance tax.
According to the Department of Revenue, some of the main cases include:
- Surviving spouses: inheritances between spouses are taxed at 0%.
- Parents of children who died at age 21 or younger: they may receive the assets without paying the tax.
- Children age 21 or younger: transfers of assets from their biological, adoptive or stepparents are exempt when legal conditions are met.
- Charities, exempt institutions and government entities: they may receive transfers without paying the tax.
- Certain agricultural properties: land and other assets used for farming may be exempt when transferred to eligible beneficiaries and if they meet the required conditions.
What assets are exempt from the tax?
It is established that certain assets and inheritance transfers are exempt from the inheritance tax, provided they meet the conditions set by state law:
- Property jointly owned by spouses: jointly owned assets between spouses are exempt, with certain exceptions.
- Life insurance: payouts from life insurance policies are exempt, whether paid to a named beneficiary or to the deceased’s estate.
- Farmland: certain properties used for farming may be exempt when transferred to eligible relatives and if they meet legal requirements.
- Assets left to charities: transfers to certain charities, exempt institutions and government entities are not subject to the tax.