inheritance

Does an inheritance count as income?

People receiving an inheritance often ask us if that inheritance will be taxed. In most cases, no, inheritances are not taxable. Typically, the deceased person would have to have a net worth of 11 million dollars, or 22 million dollars as a couple before you have to pay inheritance tax. However, you could still be subject to estate income tax.

Inherited IRA

If you inherit an IRA, assuming it is not from a spouse, it will be taxable when you withdraw the funds. The funds have to be withdrawn from the account within 10 years of inheriting it. If it’s a Roth IRA, it’s not taxable, but you still have to withdraw the funds within 10 years.

Inheriting a Brokerage Account with Securities

If you inherit a brokerage account with securities in it, you get what’s called a step up in basis. This is a nice advantage to passing on assets through a brokerage account.

Inheriting an Annuity

We are not a fan of annuities. However, if you inherit an annuity, the gain that you’ve received in that annuity is going to be taxed at regular income.

Inheriting a House

If you inherit a house, you get a step up in basis. If I give money, do I pay a gift tax?: The answer by default is yes, unless the gift is less than $15,000. If you gift over $15,000, it will be taxed.

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Have more questions? Contact Us

Casey Smith
President, Wiser Wealth Management

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By Published On: September 16, 2022

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