Is the inherited pension money taxable?

An inheritance, except for a deferred plan such as a 401k or IRA, is not taxable and is not reported on your tax return.

Income earned on inherited assets after you receive them is taxable. For example, if you inherit stocks and subsequently earn dividends on the stock, the dividend income would be taxable to you.

Edited.  2/133/2016 6:26PM

In general, inherited retirement plans are not taxable until you take a distribution.  

1.  Distributions from an inherited traditional IRA are taxable, just as they are for non-inherited traditional IRAs.                  Distributions from an inherited Roth are not taxable unless the Roth was established within the past 5 years.

2.  Inherited 401(k) plans are (or eventually will be) taxable but the amount of tax depends on the 401(k) plan rules.

For example, many 401(k) plans require a lump-sum distribution upon the death of the account holder. The surviving spouse can roll the 401(k) into an IRA, but if the beneficiary is not a spouse, s/he might be forced to take a lump-sum payment and the tax bill that goes along with it.

When it comes to inherited IRAs and other retirement plans, the rules can get pretty complicated.  When you enter your inherited IRA or retirement plan in TurboTax, we'll ask a series of questions to determine how much, if any, is taxable on this year's return.