Texas Will Never Tax Her Inheritance. Pennsylvania Will Still Bill a Dallas Woman $13,500 on Her Father’s $300,000, Because the Tax Will Follow the Parent, Not the Heir.
A Dallas woman assumed her Texas address would shield her from her late father's home state, but the tax bill arrived anyway, and the executor's phone call explained why where a parent dies matters far more than where an heir…
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Her father lived his whole life in Pittsburgh. His death this spring left his only daughter, a Dallas office manager in her late 50s, a brokerage account and two bank CDs worth $300,000. She had read that Texas has no inheritance tax, and she was right. The state repealed its inheritance tax effective September 1, 2015.
Then her cousin, the executor back in Allegheny County, called with the bill. The tax owed is $13,500, and the return is due nine calendar months after the date of death. Her Texas address changes nothing.
Pennsylvania Taxes Its Residents’ Estates Wherever the Heirs Live
Pennsylvania is one of the few states that still imposes an inheritance tax. It applies to the estates of people who die as Pennsylvania residents. The state’s own guidance puts it in one line: “Inheritance tax is paid in the state of residency of the decedent.”
How the heir is related to the person who died determines the rate. The Inheritance and Estate Tax Act sets the direct rate in 72 P.S. §9116:
- 4.5% for children, grandchildren and other direct heirs
- 12% for siblings
- 15% for everyone else
- 0% for the widow or widower, or for a parent inheriting from a child aged 21 or younger
For a resident who dies, Pennsylvania taxes all real estate and tangible property located in the state, plus “all intangible property of a resident decedent, including stocks, bonds, bank accounts” regardless of where those assets are held. Stocks and bank accounts carry the father’s residency with them. Where the daughter lives has no bearing on the bill.
How $300,000 Turns Into a $13,500 Bill
The math is a single line. Her father’s $300,000 in intangible assets passes to a direct heir at 4.5%, which makes $13,500. Direct heirs get no threshold that shelters the first dollars.
Timing reduces the bill. Pennsylvania allows a 5% discount when the tax is paid within three months of death. On her inheritance, that discount comes to $675, which cuts the payment to $12,825. Her family missed that window.
The federal side costs her nothing. The 2026 basic exclusion amount is $15,000,000, so her father’s estate owes no federal estate tax. The stock also gets a new basis equal to its fair market value on the date of death. If no estate tax return was filed, IRS Publication 551 lets her use the assessed value from the state inheritance tax filing as her basis. That makes the Pennsylvania return her proof of basis when she sells.
Three Moves That Would Have Cut the Bill to Zero
A real move to Texas. Had her father changed his legal residence to Dallas, Pennsylvania’s reach would have reduced to his real estate and tangible property inside the state. “Intangible personal property of a nonresident decedent is not taxable.” On a portfolio of stocks and CDs, that brings the tax to $0. The move has to be genuine: a new driver’s license, voter registration, tax returns and a home.
Gifts made more than a year before death. Pennsylvania pulls back gifts made within one year of death, exempting up to $3,000 per person. Gifts made earlier escape the tax entirely. Federally, the 2026 annual exclusion is $19,000 per recipient. Larger gifts require Form 709, but no tax is due until lifetime gifts exceed the $15,000,000 exclusion. One trade-off: gifted stock keeps the parent’s original basis and gives up the step-up, so cash works best for this.
Life insurance. Policy proceeds are exempt from Pennsylvania inheritance tax, whether they go to a named beneficiary or to the estate. A policy owned by a Pennsylvania parent passes to the heir free of the tax that hits the brokerage account.
What to Do Before the Nine-Month Deadline Runs Out
- Confirm the parent’s legal residence. Where the parent votes, files taxes and holds a driver’s license determines which state’s inheritance tax applies.
- The executor can tell you about the three-month window. A parent who dies in Pennsylvania leaves an estimated payment worth 5% if it is made in time. Executors who wait for the probate inventory often miss it.
- Know who files. The executor files with the Register of Wills in the county where the parent lived. If no executor is appointed, the person receiving the property is required to file a return and pay the tax, and that includes an heir living in Texas.
- Keep the appraisal. The date-of-death values on the inheritance tax return set the stepped-up basis you report when you sell the inherited shares.
- Review joint accounts. When a parent adds a child to an account, Pennsylvania still taxes the parent’s share. If the account was opened within a year of death, the full value is taxable.
A Pennsylvania estate tax attorney can confirm residency and filing questions for your own family. Most of these messes trace back to a outdated beneficiary form, an untitled account, or a legal residence nobody updated, which is why we put the full cleanup checklist in a free estate guide here. The number to remember is 4.5%: on $300,000, that comes to $13,500, and Pennsylvania collects it from a parent’s estate no matter where the child lives.
Contact [email protected] for any questions or corrections.
Vilma Rios is a tax professional and tax content contributor with more than 15 years of experience in tax and accounting. She specializes in federal tax research, tax education, and translating complex tax rules into clear, practical information for individuals, families, and small-business owners.
Vilma is a Content Tax Contributor II with the National Association of Tax Professionals (NATP), where she contributes to tax education and professional content. She has also presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as “Your Tax Geek,” Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
