Frequently Asked Questions
Am I required to file a PA Inheritance Tax Return?
For decedents who are Pennsylvania residents, a PA Inheritance Tax return is required unless all of the decedent’s assets were jointly-owned with a spouse. There is no minimum threshold for filing. The return is due within nine months after the date of death. There is a 5% discount for payments on account of the inheritance tax made within three months after the date of death. The tax rates are 0% for transfers to spouses, 4.5% for transfers to lineal descendants, 12% for siblings, and 15% for everyone else, except charities, which are exempt. Deductions include debts, mortgages, a family exemption of $3,500 (for an immediate family member living with the decedent, usually a spouse or child), funeral expenses, administration expenses, attorney fees, and the like.
What assets are included in the PA Inheritance Tax Return?
Everything owned by the decedent in his or her own name is included in the PA Inheritance Tax Return at the fair market value on the date of death, except life insurance. However, only one-half of the value of property placed in joint names more than one-year prior to death is included. Property owned jointly by husband and wife does not have to be reported at all.
Am I required to file a federal estate tax return (Form 706)?
For decedents who are U.S. citizens or residents, a federal estate tax return (Form 706) must be filed if the gross estate of the decedent, increased by the decedent’s adjusted taxable gifts and specific gift tax exemption, totals more than the filing threshold for the year of the decedent’s death. The filing threshold (basic exclusion amount) for 2018 was $11,180,000 ($22,360,000 for married couples) which is more than double what it was in 2017. For 2019, the threshold was $11,400,000 ($22,800,000 for married couples). For 2020, the threshold was $11,580,000 ($23,160,000 for married couples). For 2021, the threshold was $11,700,000 ($23,400,000 for married couples). For 2022, the threshold was $12,060,000 ($24,120,000 for married couples). For 2023, the threshold is $12,920,000 ($24,840,000 for married couples). If the decedent was married, a federal estate tax return must be filed if the estate elects to transfer any of the deceased unused exclusion amount to the surviving spouse (known as portability), regardless of the size of the gross estate or amount of adjusted taxable gifts.
What assets are included in the federal estate tax return?
Generally speaking, everything owned by the decedent in his or her own name is included in the federal estate tax return at the fair market value on the date of death. Also, jointly-owned property is included. The fair market value of these items is used, which is not necessarily what they cost or what their values were when they were acquired. The total of all of these items is your “gross estate.” The includable property may consist of cash and securities, real estate, life insurance, trusts, annuities, business interests, digital assets, and other assets. Keep in mind that the gross estate will likely include non-probate as well as probate property.
Am I required to file a gift tax return?
There is no gift tax return required for Pennsylvania. If you are a citizen or resident of the United States, you probably must file Form 709, federal gift tax return (whether or not any tax is ultimately due) if you gave gifts to someone other than your spouse in 2018 totaling more than $15,000. Same for 2019, 2020, and 2021. In 2022, the exemption was $16,000. In 2023, the exemption is $17,000. But there are many exceptions. Certain gifts, called future interests, are not subject to the $16,000 annual exclusion and you must file Form 709 even if the gift was under $16,000. You must file a gift tax return to split gifts with your spouse (regardless of the amount). These are just a few examples. Please consult us or your tax advisor to review your specific situation.