In most cases, an inheritance is not taxable to you, but there are exceptions

At some point, you may inherit money or property that, in most cases, is not taxable to you. Life insurance proceeds are included in the deceased person's estate, but are not taxable to the beneficiaries. Bank accounts and other income-producing assets such as stocks are not taxable to you when received, but the income these assets generate is taxable to you.

If you are not sure if something was included in the decedent's taxable income, you should check with the administrator or attorney handling the estate to advise you what portion of the income earned on these assets should be included on your personal tax return. You may get a Schedule K-1 for items that are allocated to you from the estate. Be sure to inform your tax preparer of any income you receive from an inheritance because, although in most cases there is no income tax liability, there are some exceptions. If you inherit a pension or IRA, you must pay tax on the amounts you receive just as the decedent would have been required to do during his life. If you inherit a pension plan or IRA, contact your tax professional as soon as possible to discuss your options regarding the withdrawal of the money. Savings bonds can also be treated in several different ways, so be sure to provide any information from the estate to you tax preparer.

Have you ever heard of the term "stepped-up basis?" This means that your investment in inherited property is considered to be the value as of the date of death. When you sell property that you inherit, you only pay tax on the difference between the amount you sold it for and the value of the property as of the date of death (or six months thereafter, as determined by the administrator of the estate). There can also be a loss if you sell the property for less than this date-of-death value. Your tax professional will need to know the date-of-death value to determine the gain or loss. The administrator or the attorney should be able to provide you with the value of the property so that you can correctly report the sale.

Tax Tips Small Business

  • Reimbursing Your Employees for Business Expenses

    What method should you choose?

    Attracting and keeping good employees is a goal in any business. One way to make life easier for your employees is to have an easy to use reimbursement plan. Travel, transportation, moving, and educational expenses are common reimbursable expenses. As the employer, you have the option to set up an accountable or nonaccountable reimbursement plan. Under either plan, you can deduct many of the business expenses paid to or for employees. However, the plan you choose can make a big difference to your employees.

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Small Business Quick Tip

  • Personal Assets to a Business

    If you have contributed personal assets, such as a computer or vehicle to your business, the lower of the fair market value or your cost basis of these assets qualifies as a business deduction, subject to depreciation limitations, beginning with the date of conversion.
Friday, 22nd February 2019
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Tax Tips Personal

  • Money for College

    Are scholarships taxable?

    Many college students receive scholarships or fellowships to help pay for their education. If you are in college and received a scholarship or fellowship grant, there are a few key points to keep in mind. Qualified scholarships and fellowships are treated as tax-free and not included in taxable income if all of the following conditions are met:

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Personal Quick Tip

  • Mileage Rates

     

    Beginning January 1, 2017, the standard mileage rates for the use of a car (including vans, pickups, or panel trucks) are:
    • 53.5 cents per mile for business miles driven;
    • 17 cents per mile for all miles driven for medical or moving purposes; and
    • 14 cents per mile for all miles drive for charitable purposes.