Inheritance tax

Forum|Forum|1 year ago
October 30, 2024
5 replies
70 views

I inherited stocks from my mother. I was told I did not have to record them. I only have to pay taxes on any profit I get in the future when I sell. Is this true?

DoninGA

Level 15

Correct. You do not report the inheritance of stock on a tax return. When you sell the stock the sale has to be reported.

K M W

Employee Tax Expert

Hi, Samirsalfity, sorry to hear about the loss of your mother. I understand it's a difficult time to get through, and then on top of everything else, to have to also worry about the impact on income taxes.

When you inherit stock, you receive what it called a "step-up" in basis. The step-up in basis is a tax provision that adjusts the value of an inherited asset to its fair market value at the time of the original owner's death (or six months afterwards, if the executor of the estate elects what is referred to as the alternative valuation date). This adjustment can significantly reduce the capital gains taxes owed by the heir when they sell the asset.

So, regardless of what your mom paid for the stock, when you inherit it, your basis is the stepped-up basis amount. The only income taxes you will have would be on any dividends that are issued after you inherited the stock and then just the taxes on any gains when you eventually sell the stock - which would be calculated based on the step-up basis versus the sales price when you sell the stock.

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JandKit

Level 6

Hi Samirsalfity,

I know that others have answered this question but I'd like to add my brain's worth as well!

Yes, the advice given was correct. When you inherit stocks, you do not have to pay taxes on the value of the stocks at the time you inherited them. Instead, you only pay taxes on any capital gains when you sell the stocks. Remember that the shares now adhere to you from your mom and retains that value. In short, the share value in your hands is the same as that of your mom. The cost basis of inherited stock is "stepped up" to its value at the time of the original owner's death. This means you only owe taxes on the increase in value from the time you inherited the stock to when you sell it.

Good luck to you!

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Donham14

Level 2

How do you report the sale of inheritance stock on the 2024 Turbo Tax The sale incurred a loss of $12,000, since the time of death of the person that had it in 2019. The cost basis was never on the 1099-B.

RobertB4444

Level 15

The cost basis of the inherited stock is the value of it on the person's date of death.

You can google the value of any stock and a date and find out what it was worth. It is as though you purchased it on that date. Then your sale price will tell you whether you made or lost money.

In the wages and income section of TurboTax scroll down to 'Investment Income' and click start next to "Stocks, Bonds, Cryptocurrency, Other". Then enter the information about the sale there.

@Donham14

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