Will I Have to Pay Tax on My Inheritance?

Inheriting wealth or assets from a loved one can be both a blessing and a burden. While it may provide financial stability, many individuals wonder if they will have to pay taxes on their inheritance. The answer to this question is not a simple yes or no, as it depends on various factors. Let's explore the topic in more detail.

Inheritance Taxes vs. Estate Taxes

An inheritance tax is a tax imposed on assets received from someone’s estate that has passed away. The person who inherits the assets must pay the tax. An estate tax is a tax imposed on someone’s estate upon their death based on the value of the estate. One, both or neither could be a factor when someone dies, depending on where you live.

Federal Inheritance Tax

There is no federal inheritance tax, and only six states — Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania — impose a tax on inherited assets as of 2023. However, a federal estate tax generally applies to individual estates with assets over $13.61 million in 2024, and the estate tax rate ranges from 18% to 40%.

Georgia Inheritance Tax

As of July 1st 2014, Georgia has no inheritance tax. Georgia's estate tax is based on federal estate tax law, and if any estate tax is due, it should be paid by the estate representative before the assets are distributed to any heir or beneficiary.

Taxable vs. Non-Taxable Inheritances

Inheritances can take various forms, including cash, bank accounts, stocks, bonds, real estate, and other valuable assets. Whether these inheritances are taxable or non-taxable depends on how they are classified and used.

• Cash: Cash received as an inheritance is generally not taxable income, according to the Internal Revenue Service (IRS)2. However, any income generated from the cash, such as interest or investment gains, may be subject to income tax.

• Property: Inherited properties are usually not subject to immediate taxation. However, if you decide to sell the property in the future, you may be liable for capital gains tax on any profit made from the sale3.

• Investments: Inheriting stocks, bonds, or other investments may trigger capital gains tax if you choose to sell them. Additionally, any dividends or interest earned from these investments may be considered taxable income3.
  

It's important to consult with a tax professional or utilize tax preparation software to accurately determine the taxability of your specific inheritance, as individual circumstances may vary.

Our Office Can Help

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