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My mother died and left a savings account payable on her death. How do I claim this on my federal tax return? |
My mother died and left a savings account payable on her death. How do I claim this on my federal tax return? Generally speaking, you do not pay taxes on money you inherit - in fact, you don't even have to declare this money on your income tax return. HOWEVER... Any tax that is due on the money that is left behind by a decedent must be paid by the decedent's estates before the money is distributed. Unless you're talking about a ton of money, the government pretty much stays away - for the 2006 tax year, each taxpapyer is allowed an estate tax exemption on the first $2 million of the estate. If your mother's estate wasn't this large, chances are you're not going to be paying estate taxes. The rules change somewhat if you're inheriting an IRA - and depend on whether the IRA was funded with before tax or after tax dollars. Roth IRAs are funded with after tax dollars - meaning that the person who funded the account had already paid taxes on the money that was deposited - so you'll never be taxed again when the Roth is cashed out. Traditional IRAs are funded with pre-tax money - you get to set that aside from your paycheck and Uncle Sam taxes only the remainder of your salary. Don't worry - they get theirs in the end - taxes are due on any traditional IRA at the time of withdrawal. Another big caution - you would pay taxes on any income generated by your inheritance. For example, if your rich uncle left you a portfolio of stocks and bonds - you'd start paying taxes on any interest or dividends that accrued once those instruments were in your hands. Definitely see a tax professional. This is one of those situations you don't want to mess up! NOT taxable if her estate was worth less than $600,000>>no taxes due. (this was true several years ago, i havent checked rules lately, if any changes have been made, threshold is now higher than 600K. check with an accountant if her estate exceeded above amt.) You wait for her will to be probated. The bank will subsequently send you the money. At the end of the year, it will send you a 1099 tax form and you can determine whether the estate cash was taxable or not. Better consult a professional,this kinds of issues require legal councilor. You will be confused and may end up as victim of fraudulent people.good luck Modified 1 year ago The entire balance until the date you inherit is nontaxable to you. You will only pay taxes on any earnings on the account (such as interest) after the date of death. |
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