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Taxes

Will I owe taxes on my inheritance?

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

3 minute read

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.

Important information for beneficiaries

Important information for executors

Check the status of your inherited account

Your questions answered

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

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