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There are no taxes up to a significant amount of the estate -- used to be $600,000 -- if what you inherit was already taxed, i.e., was in a savings account, not in an IRA. If property is sold, there would be capital gains taxes due, but if its under the $600,000 amount, no estate taxes in addition.
Normally YOU don't have to pay taxes, the estate does. (sometimes the estate wants you to pay because it could be a lower tax rate on some individuals, I was told). You get like a K-1 showing that it's inherited income, not taxable.
I was executor for my sister a few years ago, and it gets tricky dealing with life insurance, savings accounts, IRAs, etc., but bottom line was my brother and I did not pay any estate or income taxes since her estate was way less than $600K.
__________________ Hoping for Audacity
Well, in truth I'm actually not a total hawk, but I'm not a dove either -- I'm more like an angry pigeon flying over the political arena after a really big meal. -Abba Gav
So if the money is already taxed before I receive it, I don't have to report it on my taxes?
Correct - every person that dies has an estate (whether you formally have set up one or not) - if that person has any assets to distribute, then the executer of the estate (usually an attorney) has to fill out paperwork with the IRS. For 99% of the country, no taxes are owed on the estate, and the will is executed as planned.
BTW - this is all from memory of my B-Law and Tax classes in college. There may be something you need to file (K-1 - thanks Pam for reminding me of the form name )if the amount inherited is large, but your tax preparer would know that answer.
)if the amount inherited is large, but your tax preparer would know that answer.
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