The IRS generally does not need to be notified when you inherit money, as inheritances are not considered taxable income. However, the IRS is aware of large estates via tax returns (Form 706) or if the inherited asset generates income (e.g., stocks, rental property). For 2025, federal estate taxes only apply to estates exceeding $ 13.99 $ 1 3 . 9 9 million.
The IRS generally does not consider inheritance to be taxable income, and any systems that monitor the inheritance do not automatically report this information to the IRS. However, certain situations,—such as income generated from inherited assets or filing requirements for larger estates—may involve the IRS.
Best of all, with most inheritances, you won't owe any taxes. You won't even have to report them to the IRS. There is one important exception, however: If you inherit an individual retirement account (IRA), any taxes on IRA distributions that would have been owed by the deceased will now be owed by you.
Exactly how much money you can inherit without paying taxes on it will depend on your state and the type of assets in your inheritance. But as of 2026, the federal estate tax exemption allows each individual to protect up to $15 million of their estate from federal estate tax ($30 M for couples).
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.
Typically, the estate will pay any estate tax owed, with the beneficiaries receiving assets from the estate free of income taxes (see exception for retirement assets in the chart below). As a beneficiary, if you later sell or earn income from inherited assets, there may be income tax consequences.
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.
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.
Inheritances are not considered income for federal tax purposes, whether you inherit cash, investments or property. However, any subsequent earnings on the inherited assets are taxable, unless it comes from a tax-free source.
The IRS can take your inheritance if you owe back taxes. The reason is that once the executors transfer assets to you, they become part of your estate.
If you disclaim your inheritance, it will usually go to the next person who's entitled under the intestacy rules. If you claim benefits, your inheritance might change what benefits you're entitled to. You can check how your benefits might change using a benefits calculator. You can also talk to an adviser.
The IRS generally can't seize assets essential for basic living, like necessary clothing, schoolbooks, furniture, and tools of your trade (up to certain limits), plus items like unemployment, workers' comp, child support, and public assistance payments, along with a portion of your wages. However, major assets like your home, vehicles, bank accounts, and retirement funds can be seized, though the IRS must follow procedures and often seeks the quickest collection method, usually targeting liquid assets first.
Typically, no. Most of the time, the inheritance is going to be paid to you with a regular check, not a money order, not a cashier's check. It's going to be paid to you with a regular check drawn on the bank account of the estate or trust. It might come to you on a wire transfer, and wire transfers don't qualify.
The use of the gift tax exemption is tracked by the IRS when a donor files a gift tax return (Form 709). Where donors have made gifts in multiple years, Form 709 calculates the overall amount of gifts, the corresponding use of gift and estate tax exemption and the remaining exemption.
You can deposit a large cash inheritance into a savings account, either by check or by wire transfer to your bank.
Children generally inherit significant amounts tax-free due to the high federal estate tax exemption, which is $13.99 million per individual for 2025, with a planned reversion to a lower amount ($5 million adjusted for inflation) in 2026, meaning very large estates are taxed, but most inheritances fall below this threshold, though some states have their own inheritance taxes. Heirs also benefit from the "step-up in basis," which lowers capital gains tax on inherited assets like stocks and real estate.
Charity exemption
Like the spousal exemption, assets passing to charity on death are exempt from inheritance tax. As such, if an entire estate passes to charity, there will be no inheritance tax due.
Ideas for what to do with your inheritance
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.
You can typically inherit a very large amount from your parents without paying federal tax, as the federal estate tax exemption is around $15 million per person for 2026, meaning only estates larger than that pay tax, not you directly. While you generally don't pay income tax on inheritances (except for pre-tax retirement funds like IRAs/401(k)s, which are taxed as income when withdrawn), some states have their own estate or inheritance taxes with much lower thresholds, affecting a smaller portion of wealth.
Sometimes, what to do with an inheritance is as much about what you should not do with your inheritance money. Don't make any hasty or large purchases. Refrain from making significant, impulsive purchases, even if they may seem practical until you have a solid financial plan incorporating your inheritance.
Housing Benefit: Like Universal Credit, Housing Benefit is also means-tested, and an inheritance could make you ineligible if your savings go above the £16,000 limit. Income Support and Pension Credit: Inheritance may affect your eligibility for other means-tested benefits like Income Support and Pension Credit.