Legislator feels it is time for Pennsylvania to update its tax code
HARRISBURG – Rep. Valerie Gaydos (R-Allegheny), along with Rep. Greg Rothman (R-Cumberland), has introduced House Bill 1148
, legislation that would eliminate the Pennsylvania Inheritance Tax, otherwise known as the “death tax.”
“Pennsylvania is one of only six states in the nation with an inheritance tax,” said Gaydos. “Most states have been moving away from estate or inheritance taxes or have raised their exemption levels. This occurred on the Federal level as a way to encourage people and business to save and invest. The elimination of this tax at the state level will ensure that inheritance goes to the family or heir it was meant to go to and it will help to protect individuals who receive an inheritance from ending up with a tax bill at a time they are mourning the loss of their loved one.”
Currently, the Pennsylvania inheritance tax is imposed as a percentage of the value of a decedent’s estate transferred to beneficiaries by will, heirs by intestacy and transferees by operation of law. The tax rate depends on the relationship of the heir to the decedent.
The rates for Pennsylvania inheritance tax are as follows:
• 0% on transfers to a surviving spouse or to a parent from a child 21 years old or younger.
• 4.5% on transfers to direct descendants and lineal heirs.
• 12% on transfers to siblings.
• 15% percent on transfers to other heirs, except charitable organizations, exempt institutions and government entities exempt from tax.
The federal inheritance/estate tax is applied to the transfer of property to an heir after the passing of the original owner. Federal tax is calculated based on the fair market value of the property transferred to the beneficiary of the state. However, unlike Pennsylvania, the federal estate tax has a general exclusion amount. Under the Tax Cut and Jobs Act (TCJA), the filing threshold was increased to $11.58 million in 2020, $11.7 million in 2021 and is adjusted for inflation through 2025.
“Estate taxes are paid by the estate and based on the estate's overall value, while inheritance taxes are paid by an individual heir on whatever property they inherit,” said Gaydos. “The inheritance tax disincentivizes business investment in Pennsylvania and can drive high-net-worth individuals out-of-state.”
While a number of states have reduced or eliminated their death taxes over the past decade or so to dissuade well-off retirees from moving to more tax-friendly jurisdictions, 12 states and the District of Columbia still impose an estate tax and six states have an inheritance tax on the books.
“It is time for Pennsylvania to update its tax code to encourage people to stay in Pennsylvania,” said Gaydos.
House Bill 1148 has been referred to the House Finance Committee for consideration.
Representative Valerie Gaydos
44th Legislative District
Pennsylvania House of Representatives
Media Contact: Rick Leiner