Pennsylvania Exempts Family-Owned Businesses from Inheritance Tax
In 2013, Pennsylvania amended its tax laws to provide an exemption from Pennsylvania inheritance tax for transfers of qualified family-owned businesses if certain conditions are met. The old rule taxed such a transfer at a percentage of the fair market value of the business ranging from no tax on transfers to a spouse, 4.5% to children, and 12% to siblings, nieces and nephews. Under the new rules, certain family-owned businesses may now be transferred to spouses, children, siblings, nieces and nephews, inheritance tax free.
In order to qualify for the tax exemption, it must be a transfer of a “qualified family-owned business interest”, a transfer to one or more “qualified transferees”, and held by the qualified transferee for at least 7 years after the decedent’s death. A proper and timely inheritance tax return must be filed for the decedent and certifications must be filed by the transferees for each of the 7 years.
Read more about this new inheritance tax exemption.