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Indeed - inheritance is NOT taxable income...
For INCOME tax purposes inheritance is not taxable income in the US regardless the amount - as a recipient of inheritance you do not need to claim it as income. There is no any amount limit.
Please see for reference IRS publication 525 -
Gifts and inheritances. In most cases, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you....
Please be aware that while inheritance itself is not taxable - distributions from retirement accounts (including death benefits) are classified as income is respect of the decedent (IRD) and as such is taxable.Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent s final income tax return. Income in respect of a decedent realized AFTER the death is taxable the same way as it were taxable decedent.
The administrator of the estate usually report taxable portion of the estate on K1 which is used when individual tax return is prepared.
So - inheritance itself is NOT taxable and is not taxable when distributed to beneficiaries.However - income realized by the estate AFTER the death is taxable for the estate and taxable for beneficiaries if distributed.
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