No, you do not need to report or claim an inheritance
on your income tax return. Inherited money is not considered taxable income by
the IRS and no reporting requirement is necessary.
(Although 6 states (NJ, MD, PA, KY, IA and NE) do
have inheritance tax (which is separate from state income taxes) so if you live
in one of these state, you will need to go to the state's Department of
Revenue Website for more information - see State Department of Revenue Contacts )
However, if you
inherited property and then sold it, you would need to recognize any capital
gain (or loss if not personal use property) on the increase (or decrease) in
the value of the property from the date of inheritance until the date sold.
Additionally, an
inherited IRA (reported on Form 1099-R) will be considered taxable income if
you did not inherit the retirement fund from your spouse. You will only pay
taxes on any distribution of prior year tax-free contribution made by the
decedent.
Also, if this is a
foreign inheritance, there may be additional filing requirements required to
report this foreign inheritance to that IRS. Only foreign inheritance or gifts
over a certain amount threshold would require a Form
8938 - Statement of Specified Foreign Financial Assets and/or a Form 3520 - gift or
inheritance from a foreign person (nonresident alien) or from a foreign estate
and the total amount during the year exceeds $100,000.
