Does Pennsylvania Impose a Gift Tax?

Continue reading to learn whether the Commonwealth of Pennsylvania imposes a gift tax on taxable estates and how one of the experienced Butler County estate planning & probate attorneys at Heritage Elder Law & Estate Planning, LLC, can help you be strategic with your gifting throughout your lifetime.

When estate planning, does Pennsylvania impose a gift tax?

Simply put, the Commonwealth of Pennsylvania does not impose a state-level gift tax. However, the United States government imposes a federal gift tax on lifetime gifts, or property transferred freely from a giver to a receiver, in which the giver receives nothing or something of significantly lesser fair market value in return. With this, the responsibility for paying this tax goes to the giver rather than the receiver.

It is worth mentioning, though, that Pennsylvania governs state-level inheritance taxes. This tax may be triggered if the giver sadly passes away within the same calendar year of transferring property to a receiver. This is except for the first $3,000 worth of the gifts. Nonetheless, the receiver of these gifts may be liable to pay this inheritance tax rather than the estate itself being taxed.

What are the federal gift and state inheritance tax rates?

When it comes to the federal gift tax, you should know that there is an annual exclusion amount. As of 2025, the cap is $19,000 per recipient. Or for married couples, a combined gift of up to $38,000 per recipient. Or, married couples may strategically split the costs of a gift to fall below these amounts (i.e., a $25,000 gift is split into a $12,500 gift each). In short, any annual gifts above these caps must be reported to the Internal Revenue Service (IRS).

There is also the lifetime gift tax exemption, which, as of 2025, has a $13.99 million limit. All in all, the federal gift tax rate may range from 18 to 40 percent, depending on the amount that exceeds this lifetime exemption.

As far as inheritance taxes go, there is no declared annual exclusion amount in the same way there is for the federal gift tax. Also, the tax rate is not based on the total value of the estate. Rather, it is levied on each receiver’s individual inheritance and depends on the relationship between the giver and the receiver.

For example, surviving spouses and children younger than 21 years old may not be taxed at all. But older children and other lineal descendants (i.e., grandchildren) and heirs (i.e., parents and grandparents) may be held to a 4.5 percent tax rate. This tax increases to 12 percent for surviving siblings and 15 percent for all other categories of recipients, except for charitable organizations and other exempt institutions.

If you need help with executing this, do not be afraid to reach out to one of the skilled Butler County estate planning & probate attorneys. Our team at Heritage Elder Law & Estate Planning, LLC is more than capable and eager to assist you with your plan.