Ask Experts Questions for FREE Help !
Ask
    vsharp's Avatar
    vsharp Posts: 1, Reputation: 1
    New Member
     
    #1

    Dec 11, 2007, 09:56 AM
    Federal Income Taxes on Inheritance from Trust Fund
    I am about to receive an inheritance (less than what is allowed before inheritance taxes apply). Do I still have to pay federal income tax on the money received? I live in Texas, where there is no state income tax.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #2

    Dec 11, 2007, 10:55 AM
    No federal income are due on inheritances received.

    The only taxes are estate (for federal) and inheritance (for the state) taxes, which should be determined and paid by the estate BEFORE you ever see the money.
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert
     
    #3

    Dec 11, 2007, 11:12 AM
    Yes, any thing (money and property) you receive as gift or inheritance, you (the receiver) don't pay any federal tax.
    Exception: If you inherit a traditional IRA, you are called a beneficiary. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.

    For any State tax liability check at your State's web site. For most of the States there is no tax.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #4

    Dec 11, 2007, 01:29 PM
    MukatA's covered my backside once again: I forgot about the IRA exception.

    Also, on the rare occasion where the executor screws up and fails to properly file an estate return when one is due, distributes the estate without paying the estate tax, then has the monumental bad taste of either dying or NOT having the assets to cover his malfeasance, then (and only then) will the IRS come after the heir(s) to pay the estate taxes that are due.

    Finally, it is true that most states will not enforce an inheritance tax, because most states use the federal exemption guideline (which is about $2 MILLION dollars for 2008). However, that does NOT mean that the state do NOT have inheritance taxes. In fact, most states DO have an inheritance tax. It is rarely imposed because most estates are well below the $2M threshold. Further, if the estate pays an inheritance tax to the state, that tax serves as a credit against the federal estate tax, so the estate does NOT pay double taxes.
    Queenc123's Avatar
    Queenc123 Posts: 1, Reputation: 1
    New Member
     
    #5

    Jan 2, 2012, 03:41 AM
    Is there a federal tax on a trust fund inheritance in Michigan
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
     
    #6

    Jan 2, 2012, 10:23 AM
    No INHERITANCE tax, but the estate tax MAY apply. It depends on HOW MUCH the trust is valued.

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Inheritance and Federal Income Taxes [ 1 Answers ]

I understand that Estates can be passed tax free to the heirs if their value is less than $2,000,000, and that if you inherit stocks and sell them you'd have to pay Capital Gains on the difference between the stepped-up value and the actual sale value, but do you also have to report the sale...

Inheritance Taxes: Federal and in GA [ 2 Answers ]

My father passed away earlier this year, leaving 3 children a sum of less than $500,000.00. Everything was probated and distribution made between his 3 children. Just wanting to know if I have to declare this money as income and are there any taxes that will need to be paid, federally or to the...

Federal or state taxes on inheritance money [ 6 Answers ]

:) Hi, My father recently passed away and left 50,000 dollars to shared by 4 of his children,The lump sum is to go to my brother and he is to distribute it equally,He say's about 33% has to go to federal and state taxes,We live in Ohio,can you tell me if that is true? :eek: Thanks so much...

Income taxes on inheritance [ 0 Answers ]

For Colorado and Federal Income taxes, do you have to report an inheritance and pay taxes on it?


View more questions Search