Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
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.
You don't need to report a cash inheritance on your federal return. The IRS doesn't impose an inheritance tax. Only a handful of states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania) have some kind of inheritance tax.
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
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. However, you could pay income taxes on the assets in pre-tax accounts.
Immediately after receiving an inheritance, you should notify your local Social Security office.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income. Example: You inherit and deposit cash that earns interest income. Include only the interest earned in your gross income, not the inherited cash.
Bottom Line. California doesn't enforce a gift tax, but you may owe a federal one. However, you can give up to $19,000 in cash or property during the 2025 tax year and up to $18,000 in the 2024 tax year without triggering a gift tax return.
Deposit the money into a safe account
Your first action to take when receiving a lump sum is to deposit the money into an FDIC-insured bank account. This will allow for safekeeping while you consider how to make the best use of your inheritance.
If you receive income from an inheritance, providing documentation such as a will or a letter from the estate executor can prove your financial resources. This documentation should outline the amount inherited and any distribution schedule, giving landlords a clear understanding of your long-term financial stability.
This means that when the beneficiary withdraws those monies from the accounts, the beneficiary will receive a 1099 from the company administering the plan and must report that income on their income tax return (and must pay income taxes on the sum).
Many states assess an inheritance tax. That means that you, as the beneficiary, will have to pay taxes when you receive an inheritance. How much you'll be assessed depends on the state you live in, the size of your inheritance, the types of assets included, and your relationship with the deceased.
Medium inheritance ($100,000)
If you receive a larger inheritance, first consider the recommendations above—fund an emergency savings account or pay off credit cards and loans. You can also use a portion of the money to pay off all or part of your mortgage or pay down student loan debt.
Annual gift tax exclusion
The gift tax limit is $18,000 in 2024 and $19,000 in 2025. Note that this annual exclusion is per gift recipient. So, you could give away the limit to several different people in a single year and still not have to file a gift tax return and possibly pay the gift tax.
Note that under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier's checks, treasurer's checks and/or bank checks, bank drafts, traveler's checks and money orders with a face value of more than $10,000 by filing currency transaction reports.
Each state has different estate tax laws, but the federal government limits how much estate tax is collected. Any estate worth more than $11.8 million is subject to estate tax, and the amount taken out goes on a sliding scale depending on how much more than $11.8 million the estate is worth.
Key Takeaways: Cash gifts and income are subject to IRS reporting rules. Gifts of up to $19,000 in cash are exempt from reporting in 2025. Those who have household employees must report cash payments that exceed $2,800 in 2025.
You'll have to file a gift tax return if the vehicle's fair market value brings the total value of gifts you've given the recipient in 2024 above $18,000. That said, even if the gifted car is worth more than $18,000, you likely won't have to pay taxes on the gift.
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. That said, earnings made off of the inheritance may need to be reported.
Therefore, inheritances do not impact eligibility, and no reporting requirements exist for inheritances or assets received. Before assuming an inheritance will forfeit your benefits, check which program you receive—SSI or SSDI.
If an inheritance is not spent in its entirety during the month of receipt, any remaining inheritance will count as assets the following month. Depending on the remaining amount, this can cause one to be asset-ineligible.
If your total savings (including the inheritance) exceed certain thresholds, you may lose eligibility for means-tested benefits.
If your spouse dies, do you get both Social Security benefits? You cannot claim your deceased spouse's benefits in addition to your own retirement benefits. Social Security only will pay one—survivor or retirement. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher.
Without a trust, the inheritance you receive may count as extra income or assets that either disqualifies you from receiving government benefits, or results in you getting fewer benefits.