Is my inheritance taxable income on my tax return?
Most inheritances are not reported as taxable income on your tax return. Exceptions are listed below:
If you inherit a home, stocks, or other property, your cost basis in the property will usually be the fair market value of the property on the date of death. For example, if you inherit 100 shares of XYZ corporation that have a value of $15,000 on the day your loved one passed away, then your cost basis in the stock is $15,000. If you hold the stock for a few months and then sell the stock for $16,000, you would report the sale of stock on your tax return with a sales price of $16,000 and a cost basis of $15,000 for a taxable gain of $1,000.
If you inherit an IRA or pension, the IRA or pension distribution received is treated the same way the decedent would have reported the income. Usually, the IRA or pension distribution will need to be reported as taxable income on your tax return.
If you inherit a home, stocks, or other property, your cost basis in the property will usually be the fair market value of the property on the date of death. For example, if you inherit 100 shares of XYZ corporation that have a value of $15,000 on the day your loved one passed away, then your cost basis in the stock is $15,000. If you hold the stock for a few months and then sell the stock for $16,000, you would report the sale of stock on your tax return with a sales price of $16,000 and a cost basis of $15,000 for a taxable gain of $1,000.
If you inherit an IRA or pension, the IRA or pension distribution received is treated the same way the decedent would have reported the income. Usually, the IRA or pension distribution will need to be reported as taxable income on your tax return.
