If you recently received an inheritance, you may be wondering if you have any tax obligations. Fortunately, except for very large estates, most people will never have to pay any sort of tax on their inheritance.

Estate tax is calculated based on the value of the deceased’s assets at time of death. This is usually paid before any money gets distributed according to the will, so you will probably never hear anything about the estate tax. On top of this, the current threshold for the Federal estate tax is 11.4 million dollars, so most estates will be too small to trigger it.

Inheritance tax is calculated based on the value of distributions from the estate to the beneficiaries. The good news is that there is no federal inheritance tax.

There are a number of states that do have local estate and inheritance taxes, so let your tax preparer know if you received an inheritance so he or she can check your state tax law.

Lastly, this is a frequent question: If you sell an inherited home, do you owe any tax? The answer is maybe. If you sell a home for a profit, you could owe capital gains tax… but this would apply whether or not the home is inherited. Being inherited just changes how your tax preparer calculates the basis of the home sale.

Do you have additional questions about an inheritance or bequest? Clergy Financial Resources answers questions as part of our 1040 service, or separately as a Pro Advisor for non-clients. Visit our website at https://www.clergyfinancial.com/resources/proadvisor/ for more details on scheduling a Pro Advisor conference.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com


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