Inherited assets, funeral funds, and survivor benefits

[Arch Stanton]

I inherited money and property from a deceased parent. I also received funeral funds from their union. And survivor benefits from their pension.

• Do I have to pay taxes on the money I inherited?
• I sold the property I inherited. Do I have to pay taxes on that?
• Do I have to pay taxes on the funeral funds I received from their union?
• The survivor benefits I received from their pension were already taxed. Maybe I can receive some of that back?

Thanks

[DavidD66]

No, Inheritances are not considered income for federal tax purposes, whether you inherit cash, investments or property. However, any subsequent earnings on the inherited assets are taxable, unless it comes from a tax-free source.   The property you inherited is not taxable, but the sale needs to be reported.  If you have a gain, that gain will be taxed at long-term capital gain rates.  If the pension funds were paid out to you in 2020, you should have received a Form 1099-R, which you will report on your tax return.  If the funds were paid out in 2021, you will receive the 1099-R in early 2022.  As for the funeral benefits, you would have to provide more information.  You may want to contact the union to get more information on whether or not it was a taxable benefit.  

[Arch Stanton]

Thanks @DavidD66 

Regarding the sale of the inherited property. The market value was approximately $40k and we sold it for $40k. I had to split it with my sibling, so I got $20k, minus the expenses we paid to maintain it, etc. I entered this info in TurboTax under Investment Income > Stocks, Mutual Funds, Bonds, Other. What type of investment did you sell? Second home. How did you receive this investment? I inherited it. Description: Condo. Proceeds: $16,418. Fair market value when previous owner passed away? $40,000. TurboTax says "It turns out you can't take a loss on your personal-use property. We'll record this sale with a zero loss.". Is this correct? I should also mention that the property was located in another state (Florida), do I owe any taxes to that state?

Regarding the Funeral Funds. I'm not sure what information to provide. I think the union pays this to the deceased's family to help assist with funeral expenses. I tried contacting them, but haven't heard back yet.

The pension funds were paid in 2021, so I will not have to deal with this until 2022.

And the inherited cash is not taxable, so nothing to do there.

I just need to make sure I reported the sale of the inherited property correctly and find out more about the funeral funds.

[ReneeM7122]

There is no state tax return in Florida, and Florida does not have a separate state inheritance tax.  Heirs and beneficiaries in Florida do not pay income tax on any monies received from an estate because inherited property does not count as income for Federal income tax purposes.  You are correct, the inherited cash is also not taxable.

Take a look at this thread for information about the loss on the sale of the inherited home.

[Arch Stanton]

@ReneeM7122 

For the sale of the inherited property, in the "Description" field, can I just put "Condo" or do I need to put the address of the property?

[ColeenD3]

Unless you are asked for an address, you do not need to include one.