Peacock Tales • Fall 2012

Pennsylvania Eliminates Inheritance Tax for Family Farms

On July 2, 2012, Governor Tom Corbett signed House Bill 761, eliminating inheritance tax on family farms. In order for a farm to qualify for the elimination of inheritance tax, the following criteria must be met:

  • The real estate must be continuously devoted to the "business of agriculture" for seven years beyond the date of death of the transferor. "Business of agriculture" does not include: recreational activities, fur farming, slaughterhouse operations, manufacturing operations or processing operations.
  • The real estate must have a minimum yearly gross farm income of $2,000.
  • The property must be inherited by a "member of the same family."

The statute defines "member of the same family" to include: the decedent and his or her parents, lineal descendants such as children and grandchildren, brothers and sisters, aunts and uncles, some cousins, and the spouses and estates of any of them.

There are certain duties imposed on the new owner of the farm. The owner has to certify to the state on an annual basis that the land qualifies for the exemption. The owner must also notify the state within 30 days of any change causing the property to fail to qualify for the exemption. Additionally, property that does not fulfill the seven-year requirement is subject to inheritance tax in the amount that would have been paid or payable plus interest starting at the date of death of the transferor. If the property is sold within the seven years to a non-family member, you can expect the tax will be collected at the time of closing.

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