Pennsylvania can tax inherited farmland at 0% — if it stays in the family and keeps farming. Most people never hear about it.
Here is a benefit almost no one tells farm families about: Pennsylvania can tax inherited farmland at 0% inheritance tax — instead of the usual 4.5% for children — if the farm stays in the family and keeps being farmed. On a valuable farm, that can save the family tens of thousands of dollars.
To qualify, the real estate generally must pass to eligible family members and continue as a working farm producing at least $2,000 a year in agricultural income for seven years after the death. Keep farming it (or lease it to a farmer) and the exemption holds. Take it out of farming inside that window, and the tax that was excused can come back due.
This changes the math on whether to keep, lease, or sell. If the family wants to hold and farm the ground, the exemption is powerful. If selling is the goal, the ordinary inheritance-tax rates apply — but stepped-up basis still keeps capital gains low. Either way, know the real value first, and have a PA estate attorney or CPA confirm eligibility. This is general information, not tax advice.
It is a provision that can bring the PA inheritance tax on qualifying farmland to 0 percent, instead of the usual 4.5 percent for children. To qualify, the real estate generally must pass to eligible family members and continue as a working farm producing at least 2,000 dollars a year in agricultural income for seven years after the death.
If the qualifying use ends inside the seven-year window, the exemption can be lost and the inheritance tax that would have applied may become due. That is why the decision to keep, lease, or sell the farm should be made with the exemption in mind.
The exemption rewards keeping the land in agricultural use in the family, so an immediate sale to an outside buyer generally does not qualify. If selling is the goal, the ordinary inheritance-tax rates apply -- but stepped-up basis still keeps capital gains low. A family that wants to keep farming, or lease to a farmer, is where the exemption shines.
A Pennsylvania estate attorney or CPA confirms eligibility and files it correctly on the inheritance-tax return. This page explains the concept so you know to ask -- most families never learn the exemption exists.
Whether you keep it or sell it, know the value and the tax picture first. Free valuation.
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