Pennsylvania Inheritance Tax: What Your Kids Actually Pay on the IRA, the House, and the Life Insurance
Henry Supinski, ChFC® · 5 min read · August 2026
Most Pennsylvania families know the state has an inheritance tax. Far fewer know that the tax lands differently depending on what the asset is. A $500,000 IRA, a $500,000 house, and a $500,000 life insurance policy left to the same child produce three different tax bills, and one of them is zero. Here is the asset-by-asset picture.
The Rates, and the Fact That There Is No Floor
Pennsylvania's inheritance tax rate depends on who inherits, not how much. Transfers to a surviving spouse are taxed at 0%. Transfers to children, grandchildren, and parents are taxed at 4.5%. Siblings pay 12%. Nearly everyone else, including nieces, nephews, friends, and unmarried partners, pays 15%. Charities are exempt. There is no exemption amount: the tax applies from the first dollar. That is the biggest difference from the federal estate tax, which most families never reach.
Retirement Accounts: It Depends on Your Age
IRAs and 401(k)s are the assets that surprise families most. If the account owner was under 59 and a half at death, the account is exempt from PA inheritance tax. If the owner was 59 and a half or older, the full account is taxable at the heir's rate. For most retirees, that means a traditional IRA left to children is taxed at 4.5% of its full value, on top of the federal and state income tax the children will owe as they withdraw it under the 10-year rule. Roth IRAs are treated the same way for inheritance tax purposes: taxable if the owner was 59 and a half or older. A spouse inheriting a retirement account owes nothing at any age.
The House: Taxed on the Full Value, Wherever You Live
Pennsylvania real estate is subject to PA inheritance tax regardless of where the owner was domiciled at death. That is the rule that catches families who moved to Delaware or Florida and kept the Pennsylvania house. The tax is on the fair market value at death, less any mortgage. Property owned jointly with a spouse passes to the spouse at 0%. Property owned jointly with a child is a different story: the child's share depends on how and when the joint ownership was created, and it is a question for your estate attorney before, not after.
Life Insurance: The Asset That Escapes
Life insurance proceeds paid to a named beneficiary are exempt from Pennsylvania inheritance tax. Fully. That makes life insurance the one large asset a Pennsylvania resident can leave to children, siblings, or anyone else without the state taking a cut. It also makes the beneficiary designation on the policy unusually important: proceeds paid to the estate rather than to a named person can lose the exemption. This is one of the reasons how an asset is structured matters as much as how much it is worth.
Joint Accounts, Gifts, and the One-Year Lookback
Assets owned jointly with someone other than a spouse are generally taxed on the fraction that passes to the survivor. Gifts made within one year of death are pulled back into the taxable estate, less a small annual exclusion per recipient. So the strategy of giving everything away at the last minute does not work. Gifts made more than a year before death are outside the tax entirely, which is why families who plan ahead sometimes move assets earlier rather than later.
A Hypothetical Estate, Asset by Asset
The numbers are invented; the treatment is real. A widower, age 74, dies domiciled in West Chester. He leaves his son a $600,000 traditional IRA, a $500,000 house, a $300,000 brokerage account, and a $400,000 life insurance policy with the son named as beneficiary. The IRA is taxed at 4.5%: $27,000. The house is taxed at 4.5%: $22,500. The brokerage account is taxed at 4.5%: $13,500. The life insurance is exempt: $0. Total Pennsylvania inheritance tax, $63,000, due within nine months, with a 5% discount for paying within three. Had he been domiciled in Delaware and sold the West Chester house, the bill would have been zero. Had he kept the house, the $22,500 on it would have survived the move.
How We Approach It
The inheritance tax return is your estate attorney's document. Our job is upstream: making sure the plan and the paperwork point the same way. That means a beneficiary audit so the life insurance and retirement accounts pass to the people intended, thinking through which assets fund which heirs, and modeling whether a domicile change is worth it for your specific mix. It is a core piece of what we call family continuity planning, and it sits next to the beneficiary designations that decide where these assets actually go.
Questions We Hear
Do children pay Pennsylvania inheritance tax on an IRA?
Yes, if the account owner was 59 and a half or older at death. The full account value is taxed at 4.5% for children, on top of the income tax the child will owe as the money is withdrawn. If the owner was under 59 and a half, the account is exempt. A surviving spouse owes nothing at any age.
Is life insurance subject to Pennsylvania inheritance tax?
No. Life insurance proceeds paid to a named beneficiary are exempt from PA inheritance tax. Proceeds paid to the estate rather than a named person can lose that treatment, which is why the beneficiary designation on the policy matters.
Does Pennsylvania tax the house if I moved to another state?
Yes. Pennsylvania real estate is subject to PA inheritance tax regardless of where the owner was domiciled at death. Financial accounts follow your domicile; the house does not.
When is the Pennsylvania inheritance tax due?
The return is due nine months after death. Paying within three months earns a 5% discount on the tax. Your estate attorney handles the filing; the planning that determines the bill happens years earlier.