Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Paying taxes on your inheritance

By Ismat Sarah Mangla, Money magazine


NEW YORK (Money magazine) -- Question: Since Congress hasn't yet reinstated the estate tax, what are the tax rules for valuing assets that you inherit in 2010? -- Jack Pickering, La Habra, Calif.

Answer: The absence of the estate tax doesn't mean you won't have to pay taxes on an asset you inherit this year, says Mark Luscombe, principal tax analyst at CCH.

Historically, when you inherited assets like stocks or a home, your tax basis was the fair market value at the time of death (what's known as a stepped-up basis).

So if you sold a stock your grandmother left you, you'd pay capital gains taxes only on any price appreciation since her death.

That's still true for estates below $1.3 million. But under current law, if you are handed down some serious money -- say, a small business your dad started decades ago -- the decedent's original tax basis also carries over.

So you'd owe taxes on the increase in value since your benefactor owned the asset. To top of page

Overnight Avg Rate Latest Change Last Week
30 yr fixed3.92%3.81%
15 yr fixed3.12%3.03%
5/1 ARM3.17%3.15%
30 yr refi3.91%3.80%
15 yr refi3.11%3.03%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 20,997.21 22.12 0.11%
Nasdaq 6,049.21 23.98 0.40%
S&P 500 2,390.94 3.49 0.15%
Treasuries 2.30 -0.01 -0.56%
Data as of 1:10pm ET
Company Price Change % Change
Bank of America Corp... 23.72 -0.17 -0.71%
Chesapeake Energy Co... 5.25 -0.22 -4.02%
Ford Motor Co 11.44 -0.16 -1.40%
PayPal Holdings Inc 47.46 3.06 6.88%
Comcast Corp 39.94 1.15 2.96%
Data as of 12:55pm ET

Sections

Mark King, the president of Adidas North America, talks about how companies should deal with the current political climate and what statements they should make. More

Wall Street's message to President Trump. Put down the phone. Forget about the wall and immigration. To paraphrase one of your predecessors -- read our lips. Just focus on taxes. That would be enough to keep the market rally going. More

Paytm, the country's top digital payments platform, will now allow users to purchase "digital gold" through its mobile app. More