It depends on what the money is coming from. If it is coming from cash he had or proceeds from the sale of assets he had, you owe no income tax on that money. If the estate owes any capital gains tax on the sale of assets, the estate pays those.
If you are receiving money from a tax-deferred account such as an IRA or 401K, that money is taxable to you. There may be ways for you to spread the taxes out over your lifetime by rolling the money into an inherited IRA, which requires you to take small, yearly taxable withdrawals based on your life expectancy, allowing the rest of the money to continue to enjoy tax-deferred status including what that money can earn for you. Take it all at once and it will probably put you into a much higher tax bracket for that tax year, and a sizable tax bill.
No, unless it's money from an IRA or retirement plan. The distribution of estate assets are not taxed at the recipient level. If there are any taxes to be paid, they are paid at the estate level.
Here are few examples of things that could cause you to receive money from someone's death:, and a bit of info about the way its taxed
Life insurance payout = not taxed
Wrongful death settlement = could be taxed, or not, depending on details, consult an attorney or tax pro
Inheriting after-tax assets such as a house, money they had in the bank, stocks, etc. = the estate should pay federal estate tax (if any) before you are paid, so your check should be after-tax money as far as federal taxes are concerned. A few states do have inheritance taxes and their laws vary, so I suggest a google search for your state's inheritance taxes to see if this will affect you.
Inheriting pre-tax assets such as a traditional IRA account: Each type of account has its own rules for what happens when the owner dies and the account is inherited by another person. In general, you will owe taxes on the money when you withdraw it. You might also be subject to required minimum distributions based on the original owner's age. Bottom line is you'll need to consult with a tax pro or investment advisor about how to handle the account and understand your tax obligations.
Note: Federal estate tax only applies to estates with more than $5 million, so this is rare anyway and if he had that much you should have an attorney helping with the process.
There is no "inheritance tax" in the US. There is an Estate Tax but his Estate pays that and most people do not have enough assets to be liable for the Estate Tax.
If the money is coming from a pre-tax account like a Traditional IRA, Pension or 401k then, it is taxable is it is withdrawn by the beneficiary. If this is the case, you (and the IRS) will receive a 1099R by January 31st of the next year for your taxes.
Answers & Comments
It depends on what the money is coming from. If it is coming from cash he had or proceeds from the sale of assets he had, you owe no income tax on that money. If the estate owes any capital gains tax on the sale of assets, the estate pays those.
If you are receiving money from a tax-deferred account such as an IRA or 401K, that money is taxable to you. There may be ways for you to spread the taxes out over your lifetime by rolling the money into an inherited IRA, which requires you to take small, yearly taxable withdrawals based on your life expectancy, allowing the rest of the money to continue to enjoy tax-deferred status including what that money can earn for you. Take it all at once and it will probably put you into a much higher tax bracket for that tax year, and a sizable tax bill.
You do not pay income on it.
Depending on where you live, you might or might not pay inheritance tax. (Some states have this tax; some don't.)
There is no Federal tax on inheritance. Any estate taxes would be paid before you inherited anything.
MOST states don't have an inheritance tax, but a few have one.
no!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Not in the UK, his Estate pays the tax before you get it.
No, unless it's money from an IRA or retirement plan. The distribution of estate assets are not taxed at the recipient level. If there are any taxes to be paid, they are paid at the estate level.
Depends on the source of the money.
Here are few examples of things that could cause you to receive money from someone's death:, and a bit of info about the way its taxed
Life insurance payout = not taxed
Wrongful death settlement = could be taxed, or not, depending on details, consult an attorney or tax pro
Inheriting after-tax assets such as a house, money they had in the bank, stocks, etc. = the estate should pay federal estate tax (if any) before you are paid, so your check should be after-tax money as far as federal taxes are concerned. A few states do have inheritance taxes and their laws vary, so I suggest a google search for your state's inheritance taxes to see if this will affect you.
Inheriting pre-tax assets such as a traditional IRA account: Each type of account has its own rules for what happens when the owner dies and the account is inherited by another person. In general, you will owe taxes on the money when you withdraw it. You might also be subject to required minimum distributions based on the original owner's age. Bottom line is you'll need to consult with a tax pro or investment advisor about how to handle the account and understand your tax obligations.
Note: Federal estate tax only applies to estates with more than $5 million, so this is rare anyway and if he had that much you should have an attorney helping with the process.
Different states have different laws. But you won't owe federal income tax or inheritance tax.
Maybe.........or maybe not.....
What is the source of the funds?
There is no "inheritance tax" in the US. There is an Estate Tax but his Estate pays that and most people do not have enough assets to be liable for the Estate Tax.
If the money is coming from a pre-tax account like a Traditional IRA, Pension or 401k then, it is taxable is it is withdrawn by the beneficiary. If this is the case, you (and the IRS) will receive a 1099R by January 31st of the next year for your taxes.
Otherwise, it is not taxable.
yes it is called inherence tax