Question

I have a question about reporting inheritance. I inherited two bank accounts and part of a mutual fund when my father died. The estate still isn’t settled, but I’ve received the money. Is inheritance taxable income?

Answer

Regarding your question: Is inheritance taxable income, no, you usually don’t include your inheritance in your taxable income. However, if the inheritance is considered income in respect of a decedent, you’ll be subject to some taxes.

Reporting inheritance income in respect of a decedent includes gross income items that would have been taxable to the deceased person. However, these items weren’t included on the final return. The items include:

  • Employee compensation
  • Bonuses
  • Benefit plan distributions
  • Partnership income
  • Interest and dividends
  • Gain on sale of property
  • Crops and livestock
  • Installment obligations
  • Royalties

If you received one of these, you must report it as income. Report it the same way the deceased person would have reported it.

However, if the estate reported the income in respect of a decedent, you don’t need to report it as income.

Related Topics

Related Resources

Bitcoin, Taxes, and the Modern Entrepreneur | H&R Block

Many entrepreneurs find themselves wondering exactly how Bitcoin is taxed. Our H&R Block Tax Pros are prepared to assist self-employed filers with Bitcoin taxation.

The IRS, Bitcoin, and Other Virtual Currencies | H&R Block

Have you found yourself wondering how the IRS classifies Bitcoin? Our tax pros discuss relevant IRS Bitcoin law and notices. Learn more with H&R Block.

Understanding Your Closing Disclosure | H&R Block

What is a closing disclosure? When you buy a house, you will receive a closing disclosure that can benefit you at tax time. Learn more at H&R Block.

Direct Sellers and Taxes – How Does it Work?

Many are surprised to learn that even side gigs come with a tax price. H&R Block Tax pro's have arranged expert tips for those who owe direct sales taxes.