Inheritance Taxes

[italiandavea]

I live in Texas where there are no state taxes.  My parents live in Pennsylvania where there is a lot of taxes.  Dad passed away this past August.  I got a tax bill from Pennsylvania because my name was on accounts so I could help them.  Although I had to pay the inheritance tax, I received nothing from their estate since mom was still alive.  She got everything, and rightly so.   Where/Can I account for this as a deduction?

[tagteam]

Inheritance taxes differ slightly from estate taxes and, as a result, are deducted on an estate tax return (Form 706), rather than an individual income tax return.

You might want to contact the PA DOR since your share of the inheritance tax should only be one-half of the account value and your mother's share should be zero as a surviving spouse.

PA: 717-787-8327

[Opus 17]

There is nothing that you can do on your federal income tax return to adjust or deduct these state inheritance taxes. You are not allowed to deduct them as an itemized deduction on schedule A, because that only applies to state and local income tax, and an inheritance tax is not an income tax.

Whether you legitimately owed this tax under the specific circumstances is something you will have to work out with Pennsylvania.

[italiandavea]

From the Tax Code:

The rates for Pennsylvania inheritance tax are as
follows:
• 0 percent on transfers to a surviving spouse, to a
parent from a child aged 21 or younger, and to or
for the use of a child aged 21 or younger from a
parent;
• 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
charitable organizations, exempt institutions and
government entities exempt from tax.
Property owned jointly between husband and wife is
exempt from inheritance tax.

It further states that joint own accounts, like surviving mother and son, son still owes the tax even though surviving spouse get ALL the assets.  SO move out of Pennsylvania.....

[tagteam]

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@italiandavea wrote:

...SO move out of Pennsylvania.....

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Good idea, as a general principle, but @italiandavea is a Texas resident while his father was a Pennsylvania resident at the time of his passing. 

It does no good for the beneficiaries to move and establish residency in another state since it is the residency of the decedent that controls.

[fanfare]

joint accounts with parent and child are never a good idea.

[fanfare]

Besides a tax bill, was there anything nice under your Christmas tree?

[tagteam]

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@fanfare wrote:

joint accounts with parent and child are never a good idea.

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They can serve a legitimate and important purpose in certain instances.