Do I Have To Claim An Inheritance On My Taxes ?
Estate or inheritance tax becomes payable only when the value of the estate exceeds these amounts. |
In such a situation it is not incumbent on a beneficiary to claim the inheritance on his or her tax return. But the basis for this is the date of transfer or the date of death of the deceased.
If the value of investments increased by over $600 since date of death, it is incumbent on the trust to file an income tax return. The onus of filing such return will rest with the administrator of the trust. It is for the administrator to ensure that taxes on the estate if any are first remitted to the IRS before distribution to beneficiaries.
The estate tax exemption rate levels in the past few years have been as follows:
2005: First $1,500,000 in assets
2006-2008: First $2,000,000 in assets
2009: First $3,500,000 in assets
Since the tax due has already been deducted at source and paid, there is no onus on further payment by the beneficiaries. Such inheritance is considered by the IRS to be non-taxable principal.
Tax is liable by the beneficiaries only on the investment the make with the funds they receive from the inheritance. For example, a CD purchased with the distribution will not be liable for tax, but the interest it earns attracts tax.
In the case of immovable assets such as property and other investments like shares of stock, the value at death is the basis of computation of taxes for when the asset is sold
The estate might have enhanced in value between the date of death and distribution of assets. In such cases this difference is taxable to the beneficiaries.
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