Is My Inheritance Taxable?
Whether your inheritance is taxable requires a bit more conversation beyond a simple yes or no answer. While there is no federal inheritance tax, there are six states that impose their own inheritance tax. These states are Pennsylvania, Maryland, Nebraska, Kentucky, Iowa, and New Jersey. If the decedent lived in one of those states, there will be an inheritance tax owed by you as the heir or beneficiary after you receive your beneficial distribution from the estate.
While your inheritance is not typically considered income for federal taxation purposes, certain assets that you inherit may have tax consequences, such as an inherited retirement account or when you later sell inherited stocks or real estate. Having knowledge about the potential tax implications you may be subject to regarding certain transactions involving inherited assets is the key to ensuring that you are able to maximize the value of your inheritance. Just remember, it is okay to seek out answers from professionals focused in this area.
Estate tax is separate from inheritance tax and requires further conversation and consideration. Estates larger than $12.06 million in the year 2022 will have applicable estate tax levied against them on a federal taxation level.
Taxation can be a confusing world for each of us. Should you have questions about possible tax implications of your inheritance, it would be best to discuss with an experienced team including an attorney and CPA.
Call Tresp, Day & Associates, Inc. today at (858) 755-6672 to schedule your consultation with one of our experienced attorneys to alleviate your concerns about your inheritance.