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Will I owe taxes on my inheritance?

As you might imagine when taxes are involved, the short answer is "it depends."

Capital gains taxes

If you transfer the account that your loved one left you into an account in your name and don't sell any of the investments, you probably won't owe any capital gains taxes on the transfer. But you may owe taxes if you sell the investments after the account has been transferred to you.

Stepped-up cost basis

The cost basis of the account that you're inheriting refers to how much the account owner paid for the investments in the account. The stepped-up cost basis is the cost basis adjusted to the fair market value available when you inherit the assets.

You may benefit from a stepped-up cost basis if the fair market value of the investments on the day the account owner died is more than the account owner paid for the investments. Because of the step-up, you may be able to avoid or minimize capital gains taxes if you sell the investments.

Consult with a tax advisor if you have questions about the IRS rules regarding stepped-up cost basis.

Inheritance tax waivers

A few states require those inheriting accounts to submit tax waivers. We'll help you determine whether your state requires a tax waiver and, if so, how to obtain one. You can also check with your state's tax or revenue department.

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Or call us at 877-320-4822 if you have a more complex scenario

Your questions answered

We've found that people inheriting accounts tend to have similar questions.

Inheritance glossary

Being familiar with these terms might help as you transfer your loved one's account into your name.


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Capital gains taxes

When investors sell securities—such as mutual funds or stocks—at a profit, they must pay taxes on those gains.

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Cost basis

The original cost of an investment (adjusted for commissions or capital distributions). For tax purposes, the cost basis is subtracted from the investment's value at the time of sale, minus fees and commissions, to determine capital gains or losses.

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Fair market value

The price an asset would sell for if the buyer and the seller were equally interested.