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Some gifts and property are exempt from Inheritance Tax, such as some wedding gifts and charitable donations. Relief might also be available on certain types of property, such as farms and business assets.
Examples of some deductions are estimated funeral costs, probate filing fees (how much was paid to get Letters of Administration/Letters Testamentary), and the decedent's debts at the time of his or her death (such as delinquent real estate taxes or mortgage).
Inheritances are not considered income for federal tax purposes, whether you inherit cash, investments or property. However, any subsequent earnings on the inherited assets are taxable, unless it comes from a tax-free source.
Regarding Pennsylvania residents, the tax is imposed with respect to all the real estate they own in Pennsylvania, all the tangible personal property they own in Pennsylvania and all intangible property they own anywhere - whether or not in Pennsylvania (Items of tangible personal property are things that can be ...
All real property and all tangible personal property of a resident decedent, including but not limited to cash, automobiles, furniture, antiques, jewelry, etc., located in Pennsylvania at the time of the decedent's death is taxable.
Assets owned jointly between spouses, such as joint bank accounts and real estate owned jointly with right of survivorship, are not subject to Pennsylvania inheritance tax. Additionally, there is no need to even report property owned jointly between spouses on the Pennsylvania inheritance tax return.
Failure to file may subject the estate to a penalty of 25 percent of the tax ultimately found to be due or $1,000, whichever is less. An inheritance tax return must be filed in duplicate with the Register of Wills of the county in which the decedent was a resident at the time of death.
There are three methods to value the property at date of death: sale price, appraisal value or county tax assessment multiplied by the common level ratio factor. The Department of Revenue allows up to 15 months after the date of death to report a sale price.