Gifts and Inheritances

Generally, money or property you receive as a gift or inheritance is not considered to be taxable income to you.

In the case of a gift, the donor may have to pay gift taxes on the amount of the gift but you, as the recipient, do not have to treat any portion of the gift as income.

In the case of an inheritance, again the estate may have to pay an estate tax based on the value of the assets in the estate.

If the property you inherit earns income between the date the person died and the date the money or property is distributed to you, the estate will need to report the income. If those earnings are distributed to you as a beneficiary of the estate, the estate may pass the responsibility for paying the income tax on those earnings to you as well. The estate will file an estate tax return Form 1065 (PDF) and will issue a K-1 to you representing your distributive share of the estate’s income. You will report that income on Schedule E of your Form 1040.

If you receive property, rather than money, you may have a taxable gain when you sell the property. See Is money received from the sale of inherited property taxable income?

Last reviewed: September 29, 2013