Pennsylvania Inheritance Tax 2026: Rental, IRA and Fund Shares

Who pays what: the four rates

Pennsylvania taxes the heir’s share, not the estate as a whole, and the rate depends on the relationship. The Department’s page lists the rates as: “0 percent on transfers to a surviving spouse or to a parent from a child aged 21 or younger”, “4.5 percent on transfers to direct descendants and lineal heirs”, “12 percent on transfers to siblings” and “15 percent on transfers to other heirs”, except charities, exempt institutions and government entities, which are exempt. The rate section of the Inheritance and Estate Tax Act of 1991 is section 2116 (72 P.S. 9116). We could not load the statute text from the legislature’s site or a legal-code mirror from our network, so every rule on this page is read from the Department’s own forms and instructions, which cite it.

That spread is why the same $500,000 rental produces a $22,500 bill for a daughter and a $75,000 bill for a niece. If paid within three months of death, the 5% discount on the daughter’s bill is $1,125 (our arithmetic). Rates for a death before July 1, 2000 were different: the REV-1500 table shows 6% for lineal heirs from 1995 to June 30, 2000.

Asset by asset: what Pennsylvania taxes and how it values it

The return is a list of schedules, one per kind of asset, and each schedule has its own rule. This is the table the top search results do not give. It is read from the Department’s schedule instructions (REV-1500 and the schedule instructions it cites).

Two reading notes. First, Pennsylvania has “no six-month alternate valuation date similar to that found in the Internal Revenue Code”: the date of death is the only date, so a fund that falls in value after death does not help the Pennsylvania return, and a rental that falls cannot be revalued later by electing a date. Second, the debts side is generous for rental owners: the instructions allow funeral expenses, administrative costs, debts and mortgages and liens on real estate, so a leveraged rental is taxed on its equity (REV-1500, Schedules H and I; our reading).

Valuing a rental: sale price, appraisal or assessment times a county factor

Schedule A states the rule: “Estates are required to report all real estate at the fair market value as of the date of death.” The instructions then say there are three ways to show it: “sale price, appraisal value or county tax assessment multiplied by the common level ratio factor.” A sale price can be used only if the real estate sold within 15 months of death and is reported as the gross sales price; a sale to a family member or anyone connected with the administration needs an appraisal or other evidence that it was at market. A copy of the assessment notice, certified appraisal or settlement sheet must be attached.

The third method is the one to watch, because the county factor is neither small nor uniform. The Department publishes the factors as “the mathematical reciprocals of the actual common level ratio (CLR)”; the State Tax Equalization Board certifies the ratio from each county’s 2025 sales. A county whose assessments sit at 5.6% of market value, like Bucks, has a factor of 17.86; one at 94.3%, like Philadelphia, has 1.06. The same assessment therefore means very different values.

All 67 counties are in the CSV. Of the 67 factors, 26 are 5.00 or higher, 21 are 2.00 or lower, five are exactly 1.00 (Clarion, Lackawanna, Perry, Schuylkill and Warren, which STEB lists as “use 100”) and the median is 2.61 (our arithmetic). Three cautions. The factor list is published for the realty transfer tax, and the Schedule A instructions name “the common level ratio factor” without saying which list or which period applies to a date of death, so ask the Register of Wills which factor the estate should use (our reading). STEB’s own page says “CLR’s are to be used in Appeals ONLY, not to create value.” And the list changes every July 1: Philadelphia’s factor drops from 1.06 to 1.00 for documents accepted after December 31, 2026.

For an heir the arithmetic matters in two directions. A Montgomery County rental assessed at $150,000 is reported at $504,000 by the factor, so the 4.5% tax is $22,680 (our arithmetic). If an appraisal comes in lower than assessment times factor, the instructions list the appraisal as its own method, so ordering one before the return is filed can lower the base (our reading). A rental sold within 15 months gives the cleanest answer: the gross sales price, with the settlement sheet attached.

Fund shares, LLC interests and the “NAV” question

A reader with a non-traded REIT, BDC, interval fund or a private LLC interest wants to know how the estate should value it. Here is what the instructions actually say, line by line:

• Listed stock: “the mean of the highest and lowest quoted selling prices on the date of death.”
• Mutual funds: “Mutual funds are to be reported at the net asset value (NAV).”
• Over-the-counter stock: the mean between the bid and the asked price.
• LLCs, partnerships and closely held corporations (Schedule C): the estate must submit its detailed valuation calculations, a list of the entity’s real estate with addresses and estimated fair market values (and appraisals if secured), and the entity’s financial statements or federal returns for the year of death and four preceding years.

Nothing in those instructions names a non-traded REIT, a BDC or an interval fund. Our reading: those shares are securities the decedent owned, so they go on Schedule B, or on Schedule G if the account names a beneficiary, and the general rule of fair market value at the date of death applies; the sponsor’s most recent NAV per share is the nearest published number but is not named by the instructions as the answer. A fund that is restricting repurchases gives the heir a practical problem the NAV does not solve: the tax is due in nine months, and the shares may not be sellable in that time. Our page on repurchase rules after a holder dies shows which of 35 funds put a death request first and which only waive a fee.

Two filing rules matter for fund shares and brokerage accounts. A security or a security account held with “a “Transfer on Death” [TOD] designation, a “Payable on Death” [POD] designation or any other beneficiary designation format must be reported on REV-1510, Schedule G.” To satisfy the reporting requirement the estate may file a return and pay before the transfer; if not, it can receive a waiver (form REV-516) or “provide written notice of the transfer to the department within ten days of the transfer.”

Inherited IRAs and retirement plans

This is the part of Pennsylvania’s tax that surprises families. The Schedule G instructions say: “IRAs are fully taxable if the decedent was 59½ years of age or older or considered disabled at any age.” If the decedent was younger than 59½, the instruction says the IRA is taxable only if he or she was disabled and not subject to the IRS 10 percent early-withdrawal penalty. “Annuities are fully taxable.” An employer plan is different: “Employer-sponsored retirement and/or pension plans are exempt from tax if the decedent, during his lifetime, did not have the right to possess, enjoy, assign or anticipate the payments made.” A plan summary must be attached to claim that exemption. Life insurance goes the other way: the Schedule E instructions say all life insurance policies on the life of the decedent, payable to the estate or a named beneficiary, “are exempt from inheritance tax” for deaths on or after December 13, 1982.

Note what is not in the instructions: any reduction for the income tax the heir will pay when the money comes out. The Pennsylvania tax is on the account’s date-of-death value; federal income tax on the withdrawals is a separate bill, under a 10-year timeline that our inherited IRA page explains. An inherited IRA also gets no step-up in basis, unlike the rental or the fund shares; see our step-up in basis guide. IRAs with a named beneficiary go on Schedule G; those payable to the estate go on Schedule E.

Gifts, joint accounts and trusts in the last year

Pennsylvania reaches back one year. The Schedule G instructions: “Transfers made within one year of death are eligible for a $3,000 exclusion to the extent they exceed $3,000 in value.” The exclusion is per transferee per calendar year, and the Department’s own example is a decedent who transferred $10,000 within one year of death, of which $7,000 is taxable. The transfer is valued at the date of death, not the date of transfer. Three related rules from the same schedule: “Any assets made joint with another person within one year of death are fully taxable. The transferee may claim a $3,000 exclusion.”; a transfer where the decedent kept a life interest is fully taxable, and the instructions give the example that “Continued occupancy without the payment of rent would subject the property to tax.”; and revocable trusts count because they include transfers under which “the decedent had the power to alter, amend, or revoke the interest of the beneficiary.” A living trust therefore avoids probate but not the inheritance tax; our page on deeding real estate into a living trust covers the transfer-tax side, and the annual gift tax exclusion page covers the federal gift rules, which are different.

Farm and family-business exemptions, and why a rental does not qualify

Two exemptions exist for deaths after June 30, 2012 (farmland) and on or after July 1, 2013 (family business). The Department’s Q&A (dated September 8, 2016) sets the tests.

The practical result for a landlord’s heirs: putting rentals in an LLC does not make them a “family business” for this exemption. A rental house or a portfolio of rentals does not qualify; the exemptions for a working farm or a genuinely operating family company are real but narrow. The Q&A also says the family-business exemption “does not apply to property transferred to the business within one year of the date of death, unless the transfer is for a legitimate business purpose”, which closes the shortcut of moving assets into a company just before death.

A Pennsylvania resident with a rental elsewhere, or a nonresident with a Pennsylvania rental

Two cases that the family-law web pages skip.

• A Pennsylvania resident who owns a rental in Florida, Ohio or any other state. The Schedule A instructions say that “Real estate situated outside of Pennsylvania is exempt from Pennsylvania inheritance tax unless under contract to sell prior to death.” Tangible personal property outside Pennsylvania is also not subject to the tax. That does not remove the other state’s tax or the federal tax, and the bank accounts and fund shares of a Pennsylvania resident are still taxable. See our estate and inheritance tax by state page.
• A nonresident who owns a Pennsylvania rental. The REV-1737-A instructions say “All real property and all tangible personal property located within the Commonwealth of Pennsylvania is taxable.” The executor can choose the flat-rate method, which taxes only Pennsylvania real property and tangible personal property, with only mortgages, liens and unpaid property taxes on that property as deductions, or the proportionate method, which computes the tax as if the whole estate were in Pennsylvania and then takes the Pennsylvania share. Intangibles such as bank accounts, stocks and bonds are not reported under the flat-rate method. The instructions do not say how an LLC membership interest that owns a Pennsylvania building is treated; that is a question for counsel before an out-of-state owner relies on an LLC (our reading, not a Department statement).

Deadlines, the discount and what happens if the cash is not there

The three-month discount is the number that needs planning, because it falls before most estates have letters, an appraisal or a sellable asset. Paying early means paying 95 cents on the dollar: on the $39,330 bill in the example below the discount is $1,966.50 (our arithmetic). A prepayment at the Register of Wills is allowed before the return is filed. If the estate has the cash in a brokerage or bank account, the discount is a 5% saving for paying about six months early; if the cash would have to come from selling a rental or a fund interest at a poor price, it may not be worth it (our reading). That is a comparison for the estate’s lawyer and the heirs, not a recommendation.

A worked example: one inheritance, three heirs (our arithmetic)

Assumptions, all ours: a Pennsylvania resident dies in 2026 aged 80 and leaves everything to one adult child. The estate holds a Montgomery County rental assessed at $150,000 (reported at $504,000 with the 3.36 factor) with a $180,000 mortgage; a traditional IRA of $400,000 with the child named as beneficiary; 10,000 shares of a non-traded REIT at an assumed NAV of $12.00 ($120,000); $50,000 in bank accounts; and a $250,000 life insurance policy payable to the child. Funeral and administration costs are $20,000.

What the example shows (our reading): the IRA and the rental carry almost all of the bill, the exempt life insurance is the only large asset that adds nothing, and the cash needed within nine months is about $39,330 while the liquid assets are only $50,000 in the bank, a REIT interest that may be hard to sell and an IRA whose withdrawals bring federal income tax. Two smaller illustrations follow the Schedule G rules. A $60,000 cash gift to the child within a year of death leaves $57,000 taxable and a $2,565 tax at 4.5%. A $200,000 account made joint with the child within a year of death leaves $197,000 taxable, a $8,865 tax.

Decision points: what an heir or executor has to settle

Three decisions drive the Pennsylvania bill, and they come before the return is filed (our reading of the instructions above):

1. Who is the heir and at what rate. The same asset costs 4.5%, 12% or 15% depending on the relationship, and a will, a beneficiary form or a joint title can shift it.
2. What to pay, and when. The three-month discount, the nine-month deadline and the interest that starts on day nine months and one all depend on cash the estate may not have, and on whether to sell the rental, borrow or withdraw from the IRA to pay. Federal income tax and basis (our step-up and inherited IRA pages) sit alongside the Pennsylvania tax, not inside it.
3. How to prove the value. For the rental, an appraisal or sale price against the assessment times the county factor; for fund shares and LLC interests, the estate’s valuation evidence under Schedules B and C.

An estate attorney or CPA prepares the return and the tax is paid to the Register of Wills; a financial adviser can weigh the cash plan across the heirs' own finances, which is the part a form does not do.

This is analysis of public documents, not investment, legal or tax advice.

What a reader can do with this

• Find the heir class first. Spouse 0%, lineal 4.5%, sibling 12%, everyone else 15%. A will that leaves a house to a niece or a friend changes the rate on that asset to 15%.
• Mark the date. Day 90 for the 5% discount, month nine for payment and the return, month 15 for a sale price to count, and 60 days from the assessment notice to object.
• Collect the three valuation proofs for a rental: the county assessment notice and the county’s factor, an appraisal as of the date of death, or the settlement sheet if it sells within 15 months.
• Ask for the NAV statement for each non-traded fund as of the date of death, and the fund’s repurchase terms for an heir, before deciding how to raise cash.
• List every beneficiary designation. IRAs, annuities, TOD accounts and employer plans each follow a different schedule; life insurance is exempt.
• Look back one year. Gifts over $3,000 per person and accounts made joint in the last 12 months are taxable.
• If the decedent lived outside Pennsylvania but owned a Pennsylvania rental, read the nonresident return (REV-1737-A) and ask whether the flat-rate or proportionate method is lower.
• If the decedent lived in Pennsylvania and owned property elsewhere, the out-of-state real estate is outside the Pennsylvania tax unless under contract to sell, but check the other state’s own tax; our probate and real estate page covers how title passes.

FAQ

Sources, read and saved on October 20, 2026: Pennsylvania Department of Revenue, Inheritance Tax page (pa.gov); Instructions for REV-1500, Pennsylvania Inheritance Tax Return (EX 08-24); REV-720, Inheritance Tax General Information (01-22); instructions for REV-1502 Schedule A, REV-1503 Schedule B, REV-1504 Schedule C, REV-1508 Schedule E, REV-1509 Schedule F and REV-1510 Schedule G; REV-1737-A, Inheritance Tax Return Nonresident Decedent; the Department’s Inheritance Tax Q&A (updated September 8, 2016); the Department’s realty transfer tax common level ratio real estate valuation factors (July 2026); the State Tax Equalization Board’s 2025 common level ratios (May 20, 2026); and the Department’s fiscal year 2025-26 collections release. We could not load the text of 72 P.S. 9101 et seq. from our network, so statute references are those printed in the Department’s forms. Examples, shares, medians and county products are our arithmetic, with the assumptions stated. This is analysis of public documents, not investment, legal or tax advice.