In general, inheriting money or property does not count as taxable income for federal income tax purposes, according to the IRS. You do not need to report it on your federal tax return. However, earnings from inherited assets (e.g., interest, dividends) are taxable, and specific assets like IRAs or pensions may be taxed upon distribution.
In general, any inheritance you receive does not need to be reported to the IRS. You typically don't need to report inheritance money to the IRS because inheritances aren't considered taxable income by the federal government.
You can typically inherit a large amount without federal taxes because the tax applies to the deceased's estate, not the recipient, and the exemption is very high: $13.99 million in 2025 and $15 million in 2026 per person, meaning most inheritances fall below this threshold. The key is that the estate's total value must exceed these limits for any tax to be owed by the estate. Inheritances themselves (cash, property) are generally not income, but earnings on them (like interest/dividends) or pre-tax retirement funds (like IRAs) are taxable.
You can typically inherit a very large amount from your parents before hitting federal estate tax thresholds, which are around $15 million per individual in 2026, meaning most heirs receive tax-free inheritances because estates rarely exceed this limit; however, some states have their own estate or inheritance taxes, and income from inherited assets (like IRAs or rental income) is usually taxable, according to this U.S. Bank article, this Fidelity article, this Domain Money article, and this Tax Foundation article.
How much is Inheritance Tax? There is normally no tax to be paid if: the value of your estate is below the £325,000 threshold known as the nil rate band. you leave everything above the threshold to your spouse or civil partner, or.
Inheriting $100,000 or more is often considered sizable. This sum of money is significant, and it's essential to manage it wisely to meet your financial goals. A wealth manager or financial advisor can help you navigate how to approach this.
Yes, you can give your son $100,000 tax-free in 2025 by utilizing the annual gift tax exclusion and your lifetime exemption, but you'll need to report the gift to the IRS on Form 709 since it exceeds the $19,000 annual limit, though you won't pay tax unless you exceed your much larger $13.99 million lifetime gift/estate tax exemption. The gift is considered yours (the giver) for tax purposes, not your son's.
You can deposit a large cash inheritance into a savings account, either by check or by wire transfer to your bank.
This is done by the person dealing with the estate (called the 'executor', if there's a will). Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will.
Annual exemption
You can give gifts or money up to £3,000 to one person or split the £3,000 between several people. You can carry any unused annual exemption forward to the next tax year - but only for one tax year. The tax year runs from 6 April to 5 April the following year.
In most cases, an inheritance isn't subject to income taxes. The assets passed on in an investment or bank account aren't considered taxable income, nor is life insurance.
Ideas for what to do with your inheritance
While state laws differ for inheritance taxes, an inheritance must exceed a certain threshold to be considered taxable. For federal estate taxes as of 2024, if the total estate is under $13.61 million for an individual or $27.22 million for a married couple, there's no need to worry about estate taxes.
Typically, you will receive Form 1099-S reporting the sale of an inherited property which will show your sales proceeds. You will also need to determine your basis in the property to account for the sale correctly.
Sometimes, what to do with an inheritance is as much about what you should not do with your inheritance money.
The "$10,000 bank rule" refers to federal laws requiring financial institutions and businesses to report large cash transactions (deposits, withdrawals, payments) of over $10,000 in currency to the government to combat money laundering and financial crimes. Banks file Currency Transaction Reports (CTRs) for cash activity over $10,000, while businesses file Form 8300 for similar payments, both sending info to FinCEN and the IRS to track illicit funds.
The IRS primarily learns about large gifts when you file Form 709, the Gift Tax Return, for amounts exceeding the annual exclusion (e.g., $19,000 per person in 2025). They can also discover gifts through third-party reporting (banks reporting large cash transfers), audits of your estate, or by matching transactions to public records, especially for significant asset transfers like property, which might trigger property tax reassessments.
What to do with an inheritance
If you receive Social Security retirement benefits or SSDI, inheritance money generally won't affect your benefits. These programs are based on your work history and prior contributions to the Social Security system, not your current income or resources.