TurboTax United States
August 22nd, 2025
Receiving an inheritance can be exciting, but there are tax implications when you inherit money or property. Here’s what you need to know about inheritance tax and what you can do to minimize your tax burden.
New Tax Law Changes:
The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans.
Key Takeaways:
- Inheritances aren’t considered income for federal tax purposes, but subsequent earnings on the inherited assets, including interest income and dividends, are taxable (unless it comes from a tax-free source).
- The executor can choose an alternate valuation date (six months after the date of death) if it’ll decrease both the gross amount of the estate and the estate tax liability, resulting in a larger inheritance.
- Putting assets in a trust allows you to pass assets to beneficiaries after your death without having to go through probate.
- If one spouse dies, the surviving spouse usually can take over the IRA as their own. If you inherit a traditional IRA from someone other than your spouse, you can transfer the funds to an inherited IRA in your name.
