Am I correct - No income tax on inheritance?

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glassynails
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Am I correct - No income tax on inheritance?

Post by glassynails » Sat Sep 09, 2017 9:48 am

Hello.

My grandmother passed at 92 less than a year ago and we and the other 3 owners are closing on the house next week. Am I correct in that I will not have to pay income tax on the money I receive from the sale? That's what I gather from what I've found on the internet.

Thanks,
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Jack Douglas
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Re: Am I correct - No income tax on inheritance?

Post by Jack Douglas » Sat Sep 09, 2017 11:11 am

It depends on the total value of her estate, not just the value of the house. You would do well to consult a tax attorney or accountant to get the correct information. If you are the executor you'll need those services to file the final tax return. Selling the house without knowing for sure what the tax consequences are could result in an unintentional tax burden for the three of you.
About 10 years ago I served as administrator for an estate and at that time the first 1.5 million was exempt from taxes. I don't know what's current.
Paying for professional advice was a good thing I did.
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lagartija
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Re: Am I correct - No income tax on inheritance?

Post by lagartija » Sat Sep 09, 2017 12:17 pm

My experience with my father's estate was the following:
He lived in Connecticut and I live in Massachusetts. The tax laws in force the year he died resulted in the *estate* paying a federal tax and a State of Connecticut tax. I received my share of the estate, along with a special form that I included with my federal and state tax returns that documented that the tax had been paid on that income.
In Massachusetts, I was not taxed again on that amount after it was transferred to me.

You need to know *current* tax law in effect on the date of your Grandma's death; both federal and State of Maine. The estate attorney who will help with filing the estate's final tax return, can help with this. Estate law is complicated because you are dealing with different rules depending on the state in which you live.
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bear
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Re: Am I correct - No income tax on inheritance?

Post by bear » Sat Sep 09, 2017 12:26 pm

Glassy, We've been there, No tax on under 1 million, However, there is a possible tax or deduction related to the house.

The first question is/ What was the notarized appraised value of the house when your grandmother died (within 30 days)?
The second question/ What did you sell the house for?

Next/ If you sold it more more than the assessed value then the difference is considered profit and there is tax on the profit. Each of the beneficiaries will pay according to their proportion of the profit received.

Next/ If you sold it more less than the assessed value then the difference is considered a loss and there is deduction from your personal income tax reflecting the loss. Each of the beneficiaries will get a deduction according to their proportion.
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CathyCate
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Re: Am I correct - No income tax on inheritance?

Post by CathyCate » Sat Sep 09, 2017 1:50 pm

Jack Douglas wrote:
Sat Sep 09, 2017 11:11 am
It depends on the total value of her estate, not just the value of the house. You would do well to consult a tax attorney or accountant to get the correct information. If you are the executor you'll need those services to file the final tax return. Selling the house without knowing for sure what the tax consequences are could result in an unintentional tax burden for the three of you.
About 10 years ago I served as administrator for an estate and at that time the first 1.5 million was exempt from taxes. I don't know what's current.
Paying for professional advice was a good thing I did.
+1
First: My condolences to all.

Now my advice:
If you want to gamble, head for Vegas after the estate is settled. This is not the time for a DIY project. Potential pitfalls could lead you to a DUI and through the rest of the alphabet, especially with so many people involved! It all seems so easy until it gets complicated. Some professional guidance in advance will be worth every penny and increase the odds that it gets done right the first time.

beanctr
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Re: Am I correct - No income tax on inheritance?

Post by beanctr » Sat Sep 09, 2017 2:13 pm

In general you don't pay tax on an inheritance you receive, unless its an IRA or other pension type fund. R
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bear
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Re: Am I correct - No income tax on inheritance?

Post by bear » Sat Sep 09, 2017 2:30 pm

beanctr wrote:
Sat Sep 09, 2017 2:13 pm
In general you don't pay tax on an inheritance you receive, unless its an IRA or other pension type fund. R
So, are you saying that I was mistaken regarding tax/loss on the sale of the house? It's my understanding that there is no tax (under 1mil) but tax/deduction on the profit/loss from the sale of the house.
My wife inherited an IRA and did not have to pay taxes on it. She rolled it over into an annuity and pays taxes on the income. Her sister took her share of the IRA in cash - tax free.
2013 Jeff Medlin '37 Hauser 640mm sp
2006 Michele Della Guistina Concert 10 string 650mm ce
2005 Jose Ramirez 4E 650mm ce
2005 Manuel Rodriguez Model C3F 650mm sp
2003 Manuel Rodriguez Model D 650mm ce

Rasputin
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Re: Am I correct - No income tax on inheritance?

Post by Rasputin » Sat Sep 09, 2017 3:21 pm

I think Glassy really was asking about income tax this time, which would be payable by him rather than the estate.

Rasputin
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Re: Am I correct - No income tax on inheritance?

Post by Rasputin » Sat Sep 09, 2017 3:23 pm

I once took investment advice from my dentist. Worked out just great...

beanctr
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Re: Am I correct - No income tax on inheritance?

Post by beanctr » Sat Sep 09, 2017 3:35 pm

If you inherit an IRA you will have to pay tax on it unless you can roll it over into an IRA account in your name.

If you inherit a house your cost is the FMV on the date of death, if you sell it for that, no gain or loss.

Any estate taxes due are paid at the estate level, not at the individual level, R
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glassynails
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Re: Am I correct - No income tax on inheritance?

Post by glassynails » Mon Sep 11, 2017 1:35 am

I got an accountant a couple months ago, but he said "Wait till the end of the year and after you sell the house to file the FINAL return for your grandmother". I am the executor of the Estate. The house sold for approx $700k, but me and my 2 siblings are only splitting 50% of the sale since it's 50% owned by our other cousin. So each of US, will get 1/3 of 50%. We'll hopefully each get 100k or so.
"GLASSYNAILS" on Youtoob for my "no edit" - "no fakery" audio recordings. Just me, my Alhambra 7p spruce, and an Olympus ls-10 portable recorder.

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