![\"A](\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg\")
<\/figure><\/div>\n\n\nFirst, let\u2019s review the different ways a person may inherit assets or property.<\/p>\n\n\n\n
Different ways a person can inherit property<\/h2>\n\n\n\n
A person may receive assets from a deceased individual (often called a bequest or inheritance) through probate, a trust, or by direct transfer.<\/p>\n\n\n\n
- \n
- Probate<\/strong>: Assets held by a deceased individual are distributed through a legal process typically known as probate, following the terms of a decedent\u2019s will (if one exists) or by intestate succession laws if there is no will (in which case recipients are typically referred to as heirs).<\/li>\n\n\n\n
- Trust<\/strong>: Assets held in a trust are distributed according to the terms set by the decedent (i.e., the grantor who has died) during life or upon death.<\/li>\n\n\n\n
- Direct transfer<\/strong>: Some property may pass directly, either by operation of law (such as jointly held assets with rights of survivorship) or to named beneficiaries of accounts like IRAs<\/a>, life insurance policies, or payable-on-death (POD) accounts.<\/li>\n<\/ul>\n\n\n\n
Read on for more information on the tax implications of inheritance.<\/p>\n\n\n\n
<\/div>File with H&R Block to get your max refund<\/h3>
\nFile online<\/a><\/div>\n\n\n\nFile with a tax pro<\/a><\/div>\n<\/div><\/div><\/div>\n\n\n\nWhat is inheritance tax? What about estate tax?<\/h2>\n\n\n\n
First thing\u2019s first: it\u2019s incredibly rare that estate tax will affect you at the federal level. As for inheritance tax, there is no inheritance tax at the federal level, and only five states impose an inheritance tax<\/strong>. In fact, it\u2019s much more likely for income tax to affect your inheritance. Furthermore, estate tax is imposed on the decedent\u2019s estate and not the beneficiaries or heirs whether at the state level or federal level. Let\u2019s break down the differences between these taxes.<\/p>\n\n\n\n
Inheritance tax<\/strong> is a tax on assets received by an heir or a beneficiary from someone who has died. Inheritance tax only exists at the state level. An inheritance tax is paid by the beneficiary or the estate. There is no direct federal tax on inheritance.<\/p>\n\n\n\n
Estate tax<\/strong>, on the other hand, is a tax levied on the transfer of the taxable estate of a deceased person (i.e., everything the deceased owned or had an interest in at the time of their death and the value of certain lifetime taxable gifts made after 1976). However, estate tax only applies in limited cases. The estate will only pay the federal estate tax if the estate is worth more than $13,610,000 and the deceased passed away in 2024 (or $13,990,000 if they passed in 2025). The estate tax rate ranges from 18% to 40%. Some states also have estate taxes with differing dollar amount thresholds and rates.<\/p>\n\n\n\n
In most cases, you\u2019ll deal with plain old income tax<\/strong>, which can affect the estate of a deceased person in two ways:<\/p>\n\n\n\n
- \n
- Income tax imposed on an estate<\/strong> for income generated by the estate after someone passes away. This is reported using Form 1041.<\/li>\n\n\n\n
- A final income tax return (Form 1040<\/a>) filed for the deceased<\/strong> by their surviving spouse, executor, or court-appointed personal representative. This tax return covers the income the deceased received up until their death.<\/li>\n<\/ul>\n\n\n\n
Beneficiaries or heirs may also have to report income on their tax returns from inherited property or assets. See \u201cWhen does inheritance become taxable income?\u201d below.<\/p>\n\n\n\n
Which states require you to pay inheritance tax and estate tax?<\/h2>\n\n\n\n
Inheritance tax only exists at the state tax level, so it\u2019s important to be mindful of state tax laws<\/a>. You can also talk to your tax professional<\/a> about any state inheritance tax questions or concerns. As of 2025, five states have inheritance tax (tax on what you receive as a beneficiary or an heir of an estate or some assets transferred before the death):<\/p>\n\n\n\n
- \n
- Kentucky<\/li>\n\n\n\n
- Maryland<\/li>\n\n\n\n
- Nebraska<\/li>\n\n\n\n
- New Jersey<\/li>\n\n\n\n
- Pennsylvania<\/li>\n<\/ul>\n\n\n\n
12 states and the District of Columbia have an estate tax (some states may require the estate to fill out a state estate tax return even if no tax is owed):<\/p>\n\n\n\n
- \n
- Connecticut<\/li>\n\n\n\n
- Hawaii<\/li>\n\n\n\n
- Illinois<\/li>\n\n\n\n
- Maine<\/li>\n\n\n\n
- Maryland<\/li>\n\n\n\n
- Massachusetts<\/li>\n\n\n\n
- Minnesota<\/li>\n\n\n\n
- New York<\/li>\n\n\n\n
- Oregon<\/li>\n\n\n\n
- Rhode Island<\/li>\n\n\n\n
- Vermont<\/li>\n\n\n\n
- Washington<\/li>\n\n\n\n
- Washington, D.C.<\/li>\n<\/ul>\n\n\n\n
When does inheritance become taxable income?<\/h2>\n\n\n\n
Since receiving an unexpected amount of money is generally thought of as a financial windfall, many people also worry about what it means for their taxes. \u201cDoes inheritance count as income?\u201d and \u201cDo you pay taxes on inheritance?\u201d are common questions for beneficiaries and heirs.<\/p>\n\n\n\n
We\u2019ll answer these questions and more below. Keep in mind that these rules apply to all property, including:<\/p>\n\n\n\n
- \n
- Bonuses<\/li>\n\n\n\n
- Crops and livestock<\/li>\n\n\n\n
- Installment obligations<\/li>\n\n\n\n
- Interest and dividends income<\/li>\n\n\n\n
- Investments<\/li>\n\n\n\n
- Partnership income<\/li>\n\n\n\n
- Qualified retirement income<\/li>\n\n\n\n
- Rental real estate income<\/li>\n\n\n\n
- Business income<\/li>\n\n\n\n
- Royalties<\/li>\n\n\n\n
- Ordinary income portion of mutual funds<\/li>\n<\/ul>\n\n\n\n
Inheritance vs. income<\/h3>\n\n\n\n
The IRS generally does\u00a0not<\/strong>\u00a0consider inherited property or assets to be taxable income<\/a>. That means if you inherit cash, real estate, or investments, you typically don\u2019t owe federal income tax<\/a> just for receiving them.<\/p>\n\n\n\n
However, any income those assets generate after you inherit them is taxable<\/strong>. For example:<\/p>\n\n\n\n
- \n
- If you inherit a rental property, the rent you collect is taxable.<\/li>\n\n\n\n
- If you inherit stocks and later earn dividends, those dividends are taxable.<\/li>\n\n\n\n
- If you inherit a bank account, the interest is taxable.<\/li>\n<\/ul>\n\n\n\n
Here are the most common situations where inherited assets trigger a tax obligation:<\/p>\n\n\n\n
1. Income-producing assets<\/strong><\/p>\n\n\n\n
If you, as a named beneficiary or heir, inherit property that generates income\u2014like rental property<\/a>, dividends<\/a>, or interest<\/a>\u2014you must report that income on your tax return in the year you receive it.<\/p>\n\n\n\n
2. Income in respect of a decedent (IRD)<\/strong><\/p>\n\n\n\n
This is income the deceased was entitled to but didn\u2019t receive before passing. Examples include:<\/p>\n\n\n\n
- \n
- Accrued interest or dividends<\/li>\n\n\n\n
- Retirement account distributions<\/li>\n\n\n\n
- Gross profit from installment sales<\/li>\n<\/ul>\n\n\n\n
IRD is taxable to the named beneficiary or heir who receives it and is reported the same way it would have been by the deceased.<\/p>\n\n\n\n
3. Income distributed from an estate or trust<\/strong><\/p>\n\n\n\n
If an estate or trust earns income, distributes it to you, and reports the distribution on a Schedule K-1<\/strong><\/a> (<\/strong>Form 1041<\/strong><\/a>)<\/strong>, that income is taxable to you\u2014not the estate or trust. You\u2019ll receive a copy of the\u00a0Schedule K-1 (Form 1041)\u00a0showing what to report on your return.<\/p>\n\n\n\n
Inheriting through an estate vs. a trust: What\u2019s the difference?<\/h2>\n\n\n\n
Inheriting assets through an estate<\/h3>\n\n\n\n
As we mentioned at the beginning of the article, when someone passes away, their property may go through probate<\/strong>\u2014a legal process that validates their will or determines heirs if there\u2019s no will. Once probate is complete, the heirs receive the property.<\/p>\n\n\n\n
If the estate receives income (like rent or dividends), distributes it to you, and reports it on a Schedule K-1, that income is taxable to you. You\u2019ll report it on your return using the Schedule K-1<\/strong> provided by the estate.<\/p>\n\n\n\n
Inheriting assets through a trust<\/h3>\n\n\n\n
A trust is a legal entity created by a grantor either during their lifetime\u2014typically as a revocable or irrevocable trust\u2014or upon their death through a testamentary trust established by a will.<\/p>\n\n\n\n
- \n
- Revocable or irrevocable trust: <\/strong>An irrevocable trust<\/em> is one that cannot be revoked or amended and is often treated as a separate legal entity from the grantor. As a result, property transferred to an irrevocable trust during the grantor\u2019s lifetime may potentially be excluded from the grantor\u2019s estate. This distinction is important when determining the cost basis of the assets and the holding period for capital gains tax. A revocable trust <\/em>remains under the grantor\u2019s control during their lifetime and is treated as their property for tax purposes. Even though a revocable trust typically becomes irrevocable upon the grantor\u2019s death, the assets held in the trust at the time of death are generally included in the decedent\u2019s estate and may receive a step-up in basis. See \u201cStep-up in basis\u201d below.<\/li>\n\n\n\n
- Testamentary trust: <\/strong>A testamentary trust<\/em> is one created through a will. It is funded with assets that were not placed in a trust during the grantor\u2019s lifetime. These assets are transferred into a trust during the probate process, according to the instructions in the will. A testamentary trust is irrevocable from the moment it is created<\/strong>, since it comes into effect only after the grantor\u2019s death and is governed by the terms outlined in the will.<\/li>\n<\/ul>\n\n\n\n
In all cases, a designated trustee manages the trust\u2019s assets on behalf of the named beneficiaries. Trusts are often used to control how and when assets are distributed.<\/p>\n\n\n\n
- \n
- If you receive\u00a0principal<\/strong>\u00a0(the original assets placed in the trust), generally it\u2019s\u00a0not taxable<\/strong>.<\/li>\n\n\n\n
- If you receive\u00a0income<\/strong>\u00a0generated by the original assets (like interest, dividends, or rent) and it is reported on Schedule K-1, it\u00a0is taxable<\/strong>\u00a0to you and must be reported on your return using the\u00a0Schedule K-1<\/strong>\u00a0from the trust.<\/li>\n<\/ul>\n\n\n\n
Step-up in basis<\/h3>\n\n\n\n
Most inherited property receives a step-up in basis, meaning its worth is set to the fair market value on the date of the decedent\u2019s death. This matters if you later sell the property\u2014your capital gains tax will be based on the difference between the sale price and the stepped-up value, not the original purchase price.<\/p>\n\n\n\n
However, when assets are transferred from a trust to a beneficiary, the rules may differ, depending on the type of trust:<\/p>\n\n\n\n
- \n
- For a\u00a0revocable trust<\/strong>, assets are included in the grantor\u2019s taxable estate. As a result, a beneficiary\u00a0will receive a step-up in basis\u00a0upon the grantor\u2019s death.<\/li>\n\n\n\n
- For an\u00a0irrevocable trust<\/strong>, the treatment depends on whether the assets are included in the grantor\u2019s\u00a0taxable estate:
- If the assets\u00a0are included\u00a0in the estate, a beneficiary\u00a0may still receive a step-up in basis.<\/li><\/ul>\n
- \n
- However, if the assets\u00a0are not included\u00a0in the decedent\u2019s taxable estate, a beneficiary will not receive a step-up in basis. Instead, you will receive a carry-over basis equal to the trust\u2019s basis in the assets.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
Holding period<\/h3>\n\n\n\n
The IRS generally treats inherited assets as having a\u00a0long-term holding period<\/a>, regardless of how long the decedent or beneficiary actually held them. This means that when beneficiaries sell inherited stocks, they typically qualify for\u00a0long-term capital gains tax rates<\/a>, even if sold shortly after inheritance.<\/p>\n\n\n\n
However, if assets are distributed from an irrevocable trust and do not receive a step-up in basis (because they were not included in the grantor\u2019s estate), the beneficiary\u2019s holding period is generally tacked on to the trust\u2019s holding period. This means the beneficiary inherits the trust\u2019s original holding period, which may be short-term or long-term depending on how long the trust held the asset.<\/p>\n\n\n\n
Here\u2019s an example:<\/strong><\/p>\n\n\n\n
Your grandpa passed away and his will directs the creation of a trust. His will instructs the executor to transfer a stock portfolio with a fair market value of $1 million into the trust and to distribute dividend income equally to his children (your parents and aunts\/uncles) for 15 years. After the 15-year period, the trust will terminate, and the stock portfolio will be distributed equally among his grandchildren.<\/p>\n\n\n\n
During the 15-year period,<\/strong> his children would have received a Schedule K-1 (Form 1041) each year indicating how much income they would have to include in their personal income tax returns.<\/p>\n\n\n\n
In 2025,<\/strong> the trust dissolved, and the principal (the stock) was distributed to his five grandchildren. As a grandchild and beneficiary, you received a distribution of $680,000 in stock, which includes a stepped-up basis of $200,000 (the fair market value at your grandpa\u2019s death divided amongst the five grandchildren).<\/p>\n\n\n\n
- \n
- The\u00a0holding period\u00a0is considered\u00a0long-term<\/strong>, regardless of how long you or the trust held the stock. This is standard for inherited property, including distributions from a testamentary trust. This means that if you sold all the stock within three months of getting it, you would have $480,000 ($680,000 less $200,000) of long-term capital gains.<\/li>\n\n\n\n
- You would pay tax on your $480,000 of gain<\/strong> at the 0%, 15%, or 20% capital gain rates (depending on your AGI).<\/li>\n\n\n\n
- You could be liable for the Net Investment Income Tax<\/strong> equal to 3.8% of the capital gains over the lesser of the net investment income or the excess of the income over a certain threshold.<\/li>\n\n\n\n
- You could also use capital losses to offset any capital gains<\/strong> you incurred during the year, reducing your taxable income. The fiduciary should provide you with information in the year of your distribution, indicating your basis and holding period.<\/li>\n<\/ul>\n\n\n\n
How to report the taxable portion of the sale of inherited property<\/h2>\n\n\n\n
Upon selling an inherited asset, if the inherited property produces a gain, you must report it as income on your federal income tax return<\/a>. Depending on the situation, the amount realized could be subject to long-term capital gains tax or you may claim a capital loss.<\/p>\n\n\n\n
An inherited property\u2019s stepped-up basis for tax purposes is one of the following:<\/p>\n\n\n\n
- \n
- The property\u2019s fair market value on the date of the decedent\u2019s death, or<\/li>\n\n\n\n
- Less commonly, the property\u2019s fair market value on the alternate valuation date if the estate executor chooses to use alternate valuation.<\/li>\n<\/ul>\n\n\n\n
Essentially, you pay federal income taxes<\/a> on the gain, which is the difference between the basis (the property\u2019s fair market value on the date the individual died) and the higher sales price you get when you sell the property. In most cases, you\u2019ll use your inherited basis and sale information to complete IRS Form 8949<\/a>, so you can report your gains and losses on Schedule D<\/a>.<\/p>\n\n\n\n
Let\u2019s look at a couple of examples:<\/p>\n\n\n\n
Scenario 1: Calculating capital gains on the sale of your main home that you inherited<\/h3>\n\n\n\n
You inherit a home from your aunt. It was originally purchased for $125,000 in 1970. After she passed in 2000, the home was valued at $575,000 and you lived in the home for 23 years. You then sold the home for $1 million. You would incur a $425,000 gain ($1 million less $575,000). Since you lived in the home and owned it, you likely qualify for the sale of home exclusion of $250,000 (or $500,000 if you are married filing a joint return<\/a>). If you have any gain left over after applying the sale of home exclusion, you will be taxed at the long-term capital gains tax rates<\/a>.<\/p>\n\n\n\n
Scenario 2: Calculating capital gains on the sale of an inherited home you didn\u2019t live in<\/h3>\n\n\n\n
<\/a>Assume, instead, your aunt lived until 2023. Your aunt passed when the house was worth $1 million, and you inherited it at that point. You decided to sell the house for $1,005,000 10 months after you received it. You would have a $5,000 gain ($1,005,000 less $1,000,000).<\/p>\n\n\n\n
Typically, for short-term gains not related to inheritance, you would pay normal income tax rates. However, since you inherited property, you are treated as having a long-term holding period<\/a> even though you only owned the home for 10 months. Since you did not live in the house, you will not be able to take the sale of home exclusion. In this case, you would pay taxes on the $5,000 long-term gain at the capital gains rates (depending on your adjusted gross income). While you aren\u2019t eligible for the sale of home exclusion tax break, there\u2019s a silver lining: The gain is taxed at long-term rates. You could also use capital losses to offset the capital gains you incurred during the year.<\/p>\n\n\n\n
<\/a><\/a><\/a><\/a>Get help determining if your inheritance is taxable<\/h2>\n\n\n\n
Tax preparation can be confusing when it comes to inheritance\u2014do you need to pay state estate tax? And is your inheritance taxable as income? If you have recently inherited property and are looking for a way to maximize your tax savings or need help filing your return, learn about ways to file<\/a> with H&R Block. Whether you file online<\/a> or with a tax pro<\/a>, you can rest assured that we\u2019ll get you the biggest tax refund possible, taking your unique situation into consideration.<\/p>\n\n\n\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
If property, such as a bank account or a house, passes to you, you may be wondering, \u201cIs inheritance taxable?\u201d and \u201cDo you have to pay taxes on inheritance?\u201d This subject can be confusing, but H&R Block is here to help you better understand the tax treatment of inherited property. First, let\u2019s review the different […]<\/p>\n","protected":false},"author":1,"featured_media":63444,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[24,50],"tags":[],"class_list":["post-20272","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-income","category-other-income"],"acf":[],"yoast_head":"
Do You Pay Taxes on Inheritance? | H&R Block\u00ae<\/title>\n<meta name=\"description\" content=\"If you\u2019ve inherited assets like money or property, you may owe inheritance taxes. See if your inheritance is taxable & get estate tax help from H&R Block.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Is inheritance taxable?\" \/>\n<meta property=\"og:description\" content=\"If you\u2019ve inherited assets like money or property, you may owe inheritance taxes. See if your inheritance is taxable & get estate tax help from H&R Block.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/\" \/>\n<meta property=\"og:site_name\" content=\"H&R Block\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/hrblock\" \/>\n<meta property=\"article:author\" content=\"https:\/\/www.facebook.com\/hrblock\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-03T06:47:11+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-06-13T02:31:36+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"500\" \/>\n\t<meta property=\"og:image:height\" content=\"334\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"H&R Block\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@HRBlock\" \/>\n<meta name=\"twitter:site\" content=\"@hrblock\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"H&R Block\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"13 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/\",\"name\":\"Do You Pay Taxes on Inheritance? | H&R Block\u00ae\",\"isPartOf\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg\",\"datePublished\":\"2025-06-03T06:47:11+00:00\",\"dateModified\":\"2025-06-13T02:31:36+00:00\",\"author\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf\"},\"description\":\"If you\u2019ve inherited assets like money or property, you may owe inheritance taxes. See if your inheritance is taxable & get estate tax help from H&R Block.\",\"breadcrumb\":{\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#primaryimage\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg\",\"contentUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg\",\"width\":500,\"height\":334,\"caption\":\"A person writing their will, which will help determine if their beneficiary's inheritance is taxable\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Is inheritance taxable?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/\",\"name\":\"H&R Block\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf\",\"name\":\"H&R Block\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg\",\"contentUrl\":\"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg\",\"caption\":\"H&R Block\"},\"sameAs\":[\"http:\/\/hrblock.com\",\"https:\/\/www.facebook.com\/hrblock\",\"https:\/\/x.com\/HRBlock\"]}]}<\/script>","yoast_head_json":{"title":"Do You Pay Taxes on Inheritance? | H&R Block\u00ae","description":"If you\u2019ve inherited assets like money or property, you may owe inheritance taxes. See if your inheritance is taxable & get estate tax help from H&R Block.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/","og_locale":"en_US","og_type":"article","og_title":"Is inheritance taxable?","og_description":"If you\u2019ve inherited assets like money or property, you may owe inheritance taxes. See if your inheritance is taxable & get estate tax help from H&R Block.","og_url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/","og_site_name":"H&R Block","article_publisher":"https:\/\/www.facebook.com\/hrblock","article_author":"https:\/\/www.facebook.com\/hrblock","article_published_time":"2025-06-03T06:47:11+00:00","article_modified_time":"2025-06-13T02:31:36+00:00","og_image":[{"url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg","width":500,"height":334,"type":"image\/jpeg"}],"author":"H&R Block","twitter_card":"summary_large_image","twitter_creator":"@HRBlock","twitter_site":"@hrblock","twitter_misc":{"Written by":"H&R Block","Est. reading time":"13 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/","name":"Do You Pay Taxes on Inheritance? | H&R Block\u00ae","isPartOf":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website"},"primaryImageOfPage":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#primaryimage"},"image":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#primaryimage"},"thumbnailUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg","datePublished":"2025-06-03T06:47:11+00:00","dateModified":"2025-06-13T02:31:36+00:00","author":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf"},"description":"If you\u2019ve inherited assets like money or property, you may owe inheritance taxes. See if your inheritance is taxable & get estate tax help from H&R Block.","breadcrumb":{"@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#primaryimage","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg","contentUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/06\/shutterstock_1896310258.jpg","width":500,"height":334,"caption":"A person writing their will, which will help determine if their beneficiary's inheritance is taxable"},{"@type":"BreadcrumbList","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/income\/other-income\/is-your-inheritance-considered-taxable-income\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/"},{"@type":"ListItem","position":2,"name":"Is inheritance taxable?"}]},{"@type":"WebSite","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#website","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/","name":"H&R Block","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/0451551be86ad17708cdd08a71391fcf","name":"H&R Block","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/#\/schema\/person\/image\/","url":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg","contentUrl":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-content\/uploads\/2017\/08\/BlockAuthor.jpg","caption":"H&R Block"},"sameAs":["http:\/\/hrblock.com","https:\/\/www.facebook.com\/hrblock","https:\/\/x.com\/HRBlock"]}]}},"_links":{"self":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/posts\/20272","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/comments?post=20272"}],"version-history":[{"count":0,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/posts\/20272\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/media\/63444"}],"wp:attachment":[{"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/media?parent=20272"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/categories?post=20272"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hrbcomlnp.hrblock.com\/tax-center\/wp-json\/wp\/v2\/tags?post=20272"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
- You would pay tax on your $480,000 of gain<\/strong> at the 0%, 15%, or 20% capital gain rates (depending on your AGI).<\/li>\n\n\n\n
- The\u00a0holding period\u00a0is considered\u00a0long-term<\/strong>, regardless of how long you or the trust held the stock. This is standard for inherited property, including distributions from a testamentary trust. This means that if you sold all the stock within three months of getting it, you would have $480,000 ($680,000 less $200,000) of long-term capital gains.<\/li>\n\n\n\n
- However, if the assets\u00a0are not included\u00a0in the decedent\u2019s taxable estate, a beneficiary will not receive a step-up in basis. Instead, you will receive a carry-over basis equal to the trust\u2019s basis in the assets.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n
- For an\u00a0irrevocable trust<\/strong>, the treatment depends on whether the assets are included in the grantor\u2019s\u00a0taxable estate:
- If you receive\u00a0income<\/strong>\u00a0generated by the original assets (like interest, dividends, or rent) and it is reported on Schedule K-1, it\u00a0is taxable<\/strong>\u00a0to you and must be reported on your return using the\u00a0Schedule K-1<\/strong>\u00a0from the trust.<\/li>\n<\/ul>\n\n\n\n
- Testamentary trust: <\/strong>A testamentary trust<\/em> is one created through a will. It is funded with assets that were not placed in a trust during the grantor\u2019s lifetime. These assets are transferred into a trust during the probate process, according to the instructions in the will. A testamentary trust is irrevocable from the moment it is created<\/strong>, since it comes into effect only after the grantor\u2019s death and is governed by the terms outlined in the will.<\/li>\n<\/ul>\n\n\n\n
- Revocable or irrevocable trust: <\/strong>An irrevocable trust<\/em> is one that cannot be revoked or amended and is often treated as a separate legal entity from the grantor. As a result, property transferred to an irrevocable trust during the grantor\u2019s lifetime may potentially be excluded from the grantor\u2019s estate. This distinction is important when determining the cost basis of the assets and the holding period for capital gains tax. A revocable trust <\/em>remains under the grantor\u2019s control during their lifetime and is treated as their property for tax purposes. Even though a revocable trust typically becomes irrevocable upon the grantor\u2019s death, the assets held in the trust at the time of death are generally included in the decedent\u2019s estate and may receive a step-up in basis. See \u201cStep-up in basis\u201d below.<\/li>\n\n\n\n
- A final income tax return (Form 1040<\/a>) filed for the deceased<\/strong> by their surviving spouse, executor, or court-appointed personal representative. This tax return covers the income the deceased received up until their death.<\/li>\n<\/ul>\n\n\n\n
- Trust<\/strong>: Assets held in a trust are distributed according to the terms set by the decedent (i.e., the grantor who has died) during life or upon death.<\/li>\n\n\n\n