Is Inheritance taxable? Are Gifts Taxable (to the recipient)

[MarilynG1]

@FredTax19 Since you are a California resident, you would report your inherited pension lump sum amount on your California return.

If you transferred the lump sum distribution to an inherited IRA in your name as beneficiary (if eligible to do so), it is not taxable until you begin taking distributions.

Click this link for more info on Lump Sum Distributions.

This link has details on Inherited Pension Income in California. 

[Vm10--7027]

cash

[KrisD15]

If you inherited cash, you don't report it, it is not taxable. 

[julzp671]

Should I be taxed on a 1099-INT or 1099-R because I received money from the death of an 85 year old family member?

[JotikaT2]

It depends.

If you have a 1099-INT, then you must have had interest income generated on the money you inherited.  If this is accurate, you would report that as interest income on your tax return.

1. Log back into TurboTax and go to the Federal interview section of the program.
2. Select Income & Expenses
3. Scroll down to All income
4. Select Interest on 1099-INT
5. Proceed to enter the information as reported to you on the 1099-INT form.

As for a 1099-R, this form represents distributions from retirement accounts and could be taxable depending upon the type of retirement account.  This would also be reported on your tax return in the following section of TurboTax.

1. Select Income & Expenses 
2. Scroll down to All Income 
3. Select show more to the right of Retirement Plans & Social Security 
4. Select start/revisit to the right of IRA, 401(k), Pension Plan Withdrawals (1099-R) 
5. As you enter your 1099-R information, be sure to fill out the state section.  The program will then answer any questions as it relates to that particular 1099-R.
6. To enter additional 1099-R forms, simply select +Add Another 1099-R.

Essentially, you would report any income that is generated from the assets you have inherited.

@julzp671

[ALBERTMARTHAwilliam]

yes

[frugal 2021]

My dead mother's house sold in October 2020. I am over 70 years old, with no other taxable assets aside from this recent inheritance not exceeding $1 million net proceeds after property sold.  Do I pay capital gains tax? And I assume I will be paying income tax but in 2022 for 2021 since the funds were generated this year? And no I have not yet gotten access to the funds. They are still in a Trust Account because certain remunerations between my sibling and I ll have to be completed to determine exactly the amount each of us will ultimately get into our hands in January 2022. But my share will be no more than $1 million, maybe a bit less. I ask because I have been given incomplete or inaccurate information from certain people who may not have my best interests for their other business gains.  So I prefer a more neutral impartial source as Turbotax. I was very pleased with the ease of using to it for the first time to file my taxes back in April of this year. And before this inheritance, my cash or other assets were very modest and qualified for a refund, nothing taken away. I am sure next year will be different. But for now focusing on capitol gains tax from a recent inheritance from selling my dead mother's house.

[DanielV01]

@frugal 2021.  While inheritances themselves are not taxable, what gets filtered through an estate or a trust can be.  And that can be complicated.  The most typical form of reporting is that the estate reconciles what will be distributed, pays applicable tax at the estate level, and then passes the income through to the recipients via Schedule K-1, which will report anything that would be taxable at the personal level.  This is speaking very generally.

What you describe above seems to in general fit this description:  your mother's assets are being liquidated/distributed via the trust/estate set up.  If that is so, you will receive documents from the Trust/Estate that will indicate what if anything you need to report on your personal tax return.  In your case, the individual who should be in the best position to answer all of the specifics should be the Executor, who is supposed to be (but isn't always) a neutral party.  If you are going to that source, however, and are uncomfortable with the answers you are receiving, your interests would best be served by seeking an attorney, as TurboTax cannot give any legal advice.

[frugal 2021]

Thanks for your advice. And yes, I do have an estate & Living Trust attorney, who was my mother's Living Trust estate attorney. When mother died, then I hired her to counsel me to navigate the plethora of laws and schedules govt. requires.  And yes, an investment brokerage firm has the net proceeds from house sale.  Funds will be released for my personal use, and for my sibling, the other heir, after some reimbursements are finalized. But for my own purposes, I am not clear if I am immune from any taxes other than personal income tax. Bluntly, I did not have sufficient annual income to worry about paying taxes or much of it. But inheriting in just a couple of months ago or less an amount which may be at $1M or less, not exceed it, caused me to find out if all I am expected to pay is personal income tax.  When I was not even concerned about inheritance this or that, I did not pay much attention when Fed. policy revised tax laws on how much capital gains inheritance funds is immune from taxes, or up to how much was tax free and how much if into senior citizen age.  I think locally or statewide, being in CA, transfer tax is imposed on the basis of how much from the inheritance if from  selling one property goes toward buying another residential property.  My plan is to buy a home costing less than amount I inherited.  

Much appreciated if you can, at least, educate me on how laws were revised in more recent years designed to help protect or minimize taxes on people inheriting funds from deceased.  More I know now, less any attorney can feed me convoluted language to stretch fees.  And when it is time to actually hire some tax accountant, if Turbotax cannot accommodate me, I will pay for actual application and filing of tax forms, not for basic information.

Thanks.

[DanielV01]

@frugal 2021  Your estate & Living Trust attorney should be able to give you more specifics on what portion of what is distributed from the estate to you will be taxable to you personally.  That portion I can't comment very much on.

But you comment on what I will describe as the "inherited real estate transfer of property tax" in California, which this year was redefined by Proposition 19.  I found this article that discusses it:  Article on Proposition 19.

I am only commenting on what I understand to be the tax implications, and these are not income tax but property tax implications.  For an inherited property (which Proposition 19 defines narrowly; your attorney can probably assist in determining if this applies to you), Proposition 19 allows you to sell the property, purchase another property, and be liable for the property taxes of what the original value of the home was plus the difference of the sale of the inherited home and the purchase of the new, if the new home cost more.  It's easier to give an example:

Let's say your mom paid 100,000 for the home she purchased, and the state has been assessing real estate taxes on this value.  Obviously, the property has increased in value, so when you go to sell the home, it's now worth $800,000.  Under the law, if you purchase a qualifying new home within 2 years for no more than $800,000, your real estate taxes will be figured on $100,000 and not $800,000.  If instead, for example, you purchased a home for 1,000,000, the property tax would be figured on $300,000 (the original $100,000 plus the $200,000 difference in the sale price of the old home and the purchase price of the new home).

Those are the transferred property taxes.  But capital gains taxes are different.  Those taxes (Federal and state) are figured on the gain of the sale of the home based on the home's value at the time of your mother's passing.  Since property usually goes up in value, this allows you to claim less gain on the sale, which means less capital gains tax.  

And this is just a general picture, but your attorney can probably help you with the specifics.

[terry2602]

I live in Indiana inherited cash when my Mother passed.

[LeonardS]

No, inheritances are not taxable. 

Generally, the person receiving a gift typically does not have to pay gift tax. The giver, however, will generally file a gift tax return when the gift exceeds the annual gift tax exclusion amount, which is $15,000 per recipient for 2021.

@terry2602

[msagnew2004]

My mother passed in March 2021. She lived in Ohio and I’ve been in Pennsylvania since 2014. She has a retirement plan in Ohio. She was 58. After we sent docs proving she was deceased they split her account between her 3 children. I received 1099R. When I added the 1099R to my federal return, it says to consider filing non-resident state tax. Should this be on my PA federal or OH non-resident state?

[FangxiaL]

The message "Consider filing a nonresident OH return" reminds you that you should consider filing a nonresident OH return since you had income taxes withheld for OH as shown on your 1099-R form.

OH does treat pension income as regular income. The 1099-R you received is considered an OH source of income. You are required to file a nonresident OH state tax return.

You enter the 1099-R form on the federal return, and the information will flow to your resident PA and nonresident OH returns.

If you are using TurboTax Online,  follow the steps below to prepare PA and OH returns:

1. Enter all your income forms such as W-2 and 1099-R within the Federal return
2. After completing the federal return, prepare a non-resident OH return first. If you don't see OH return, click Add another state
3. Proceed to prepare your nonresident OH return. Depending on the amount of inherited pension income, you should receive a refund if the state taxes withheld is more than the tax liability.
4. The next step is to prepare your resident PA return.

I am so sorry for your loss.

@msagnew2004

[1Badque2]

Received 19K from the sale of estate of family member who passed away.  Where do I file this amount received? What is the tax liability for this amount?