Inheritence Tax from sibling.

Forum|Forum|1 year ago
October 24, 2024
3 replies
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We inherited money from my husband's sister this year.

She passed last year but the money was sent to us this year.

Do we owe taxes on it, as it was family, or not? How do we declare it?

Thank you.

Best answer by DoninGA

A cash inheritance is not reported on a federal or state tax return.

DoninGAAnswer

Employee

A cash inheritance is not reported on a federal or state tax return.

Leslie1012Author

Thanks

Opus 17

Employee

Cash inheritance is not taxable or reported, but be careful. There are many inheritances that are cash-like, but are not cash.

For example, if you inherited investments, you may owe capital gains when you sell. If the estate sells the investments for you and gives you the cash, you are still responsible for taxes on any gains unless the estate pays them (usually the estate does not pay the taxes because the tax rate on the estate is higher than on individuals). Or, if the money was in an IRA, and the estate cashed it out, and sent you the money, either you or the estate needs to pay tax on the IRA withdrawal.

But just a cash split from her bank account, that's not taxable.

Leslie1012Author

Thanks.

jwbEA2012

https://www.irs.gov/publications/p590b

If the cash you received was from an IRA, which would make it a non spouse inherited IRA, things you must know are whether it was a Roth account and how long the account was open or if it was a traditional IRA. As for paperwork involved, you may see a form 1099-R for the tax year of the received funds, if so, file it with your tax return and it will show a taxable amount, if any.

Opus 17

Employee

@jwbEA2012

If taxpayer is the beneficiary of an IRA, that is completely different than receiving "cash." If the estate was the beneficiary of an IRA and cashed it out, the taxpayer would receive a K-1, and estate would deal with what kind of IRA it was and what taxes are owed, and that would all be on the K-1