Inheritance Tax Calculator
Calculate taxes on your inheritance, understand the 10-year rule for inherited IRAs, and explore smart investment strategies.
Inheritance Details
Beneficiary Type
Your Tax Situation
After-Tax Value
10-Year Distribution Rule
Under the SECURE Act, non-spouse beneficiaries must withdraw all funds within 10 years. Here's an equal distribution strategy:
| Year | Distribution | Tax (24%) | After Tax |
|---|---|---|---|
| 1 | $50,000 | $12,000 | $38,000 |
| 2 | $50,000 | $12,000 | $38,000 |
| 3 | $50,000 | $12,000 | $38,000 |
| 4 | $50,000 | $12,000 | $38,000 |
| 5 | $50,000 | $12,000 | $38,000 |
| Total (10 yr) | $500,000 | $174,818 | $553,589 |
Investment Growth Scenarios
How your $553,589 after-tax inheritance could grow:
| Year | Conservative (4%) | Moderate (7%) | Gold IRA (6%) |
|---|---|---|---|
| 0 | $553,589 | $553,589 | $553,589 |
| 5 | $673,526 | $776,438 | $740,828 |
| 10 | $819,448 | $1,088,994 | $991,394 |
| 20 | $1,212,983 | $2,142,217 | $1,775,436 |
Smart Steps When You Receive an Inheritance
1. Don't Rush
Take 6-12 months before making major decisions. Park funds in a high-yield savings account while you plan.
2. Understand Tax Rules
Different assets have different tax treatments. Inherited IRAs require action within timelines. Consult a CPA.
3. Diversify Wisely
Don't put all inherited assets in one place. Consider a mix of stocks, bonds, real estate, and precious metals.
Preserve Your Inheritance Across Generations
An inheritance represents a lifetime of someone's work. Protect it from inflation and market volatility with physical gold that has held value for 5,000+ years.
A Gold IRA lets you grow your inheritance tax-deferred (or tax-free with Roth). Pass wealth to the next generation with built-in inflation protection.
Diversify your inheritance with a Gold IRA - preserves wealth across generations while providing portfolio stability.
Understanding Inheritance Taxes
Estate Tax vs Inheritance Tax
Estate Tax: Federal tax paid by the estate before distribution. In 2024, estates under $13.61 million ($27.22 million for married couples) are exempt - meaning 99.9% of Americans pay zero federal estate tax.
Inheritance Tax: State tax paid by the beneficiary after receiving assets. Only 6 states have inheritance tax (Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania), and most exempt spouses and direct descendants.
The SECURE Act & Inherited IRAs
The SECURE Act of 2019 eliminated the "stretch IRA" for most non-spouse beneficiaries. Now, inherited traditional IRAs must be emptied within 10 years of the original owner's death.
- - Spouse beneficiaries: Can roll over to their own IRA and follow normal RMD rules
- - Non-spouse beneficiaries: Must withdraw all funds within 10 years (all distributions are taxable income)
- - Eligible Designated Beneficiaries: Minor children, disabled/chronically ill, and those within 10 years of the decedent's age can still stretch
Step-Up in Basis Explained
One of the most valuable tax benefits in inheritance law: when you inherit appreciated assets (real estate, stocks), your cost basis "steps up" to the fair market value at the date of death.
Example: Parent bought stock for $50,000, now worth $500,000. If sold during their lifetime: $450,000 taxable gain. If inherited: your basis becomes $500,000 - sell immediately and pay zero capital gains tax!
Important Disclaimer
This calculator provides estimates for educational purposes only. Tax laws are complex and vary by situation. Inherited IRA rules depend on your relationship to the decedent and account type. This is not tax or legal advice. Consult a qualified tax professional or estate attorney for your specific situation.
Key Facts About Inheritance Taxes
No Federal Inheritance Tax
The U.S. has no federal inheritance tax. Only 6 states (IA, KY, MD, NE, NJ, PA) have state inheritance taxes, and most exempt spouses and children.
10-Year Rule for IRAs
Non-spouse beneficiaries must withdraw all inherited IRA funds within 10 years under the SECURE Act. This can create significant tax liability.
Step-Up in Basis
Inherited stocks and real estate get a 'stepped up' cost basis to fair market value at death, eliminating capital gains on lifetime appreciation.
Act Within Deadlines
Inherited IRAs have strict deadlines. Missing them can result in the entire balance becoming taxable immediately. Consult a CPA promptly.
How Different Inherited Assets Are Taxed
| Asset Type | Federal Income Tax | Special Rules |
|---|---|---|
| Cash | None | Interest earned after inheritance is taxable |
| Traditional IRA/401(k) | Ordinary income on withdrawals | 10-year rule for non-spouse; spouse can rollover |
| Roth IRA | None (if qualified) | 10-year rule still applies; tax-free growth |
| Stocks/Investments | None (step-up in basis) | Only pay tax on gains after inheritance |
| Real Estate | None (step-up in basis) | Property taxes continue; rental income taxable |
| Life Insurance | None | Proceeds tax-free to named beneficiaries |
Strategies for Inherited IRAs
Strategy 1: Equal Annual Distributions
Divide the inherited IRA by 10 and withdraw the same amount each year. This spreads the tax burden evenly and keeps you from jumping into higher tax brackets.
Example: $500,000 inherited IRA = $50,000/year for 10 years (plus growth on remaining balance)
Strategy 2: Tax Bracket Management
Withdraw more in years when your income is lower (job change, sabbatical, early retirement) and less in high-income years. Keep withdrawals below the next tax bracket threshold.
Pro tip: If you expect income to increase, front-load distributions in earlier years
Strategy 3: Charitable Giving
If charitably inclined, you can donate IRA distributions directly to charity (Qualified Charitable Distribution) once you reach age 70 1/2, avoiding income tax on the donated amount entirely.
Strategy 4: Roth Conversion Bridge
Consider using some of your inheritance to pay the tax on Roth conversions of your own traditional IRA. This accelerates tax-free growth for your retirement while managing inherited IRA distributions.
States With Inheritance Tax (2024)
The other 44 states have no inheritance tax. Estate taxes are separate and paid by the estate, not the beneficiary.
Inheritance FAQs
Do I have to pay taxes on an inheritance?▼
It depends on the asset type. Cash and stepped-up assets (stocks, real estate) generally have no immediate federal income tax. Inherited traditional IRAs and 401(k)s are taxed as ordinary income when withdrawn. Only 6 states have inheritance taxes, and most exempt spouses and direct descendants.
What is the 10-year rule for inherited IRAs?▼
Under the SECURE Act (2019), most non-spouse beneficiaries must withdraw all funds from an inherited traditional IRA within 10 years of the original owner's death. Each withdrawal is taxed as ordinary income. Spouses can roll the IRA into their own and follow normal rules.
What is step-up in basis and why does it matter?▼
When you inherit appreciated assets like stocks or real estate, your cost basis 'steps up' to the fair market value at death. If someone bought stock for $50,000 and it's worth $500,000 when you inherit it, your basis is $500,000 - you pay zero capital gains tax on the $450,000 gain!
What should I do first when I receive an inheritance?▼
Don't rush into decisions. Park funds in a high-yield savings account while you plan. Pay off high-interest debt, build an emergency fund (6 months expenses), and consult a CPA for tax implications. Wait at least 6 months before making major investment decisions.
Can I roll an inherited IRA into my own IRA?▼
Only surviving spouses can roll an inherited IRA into their own IRA. Non-spouse beneficiaries must keep it as an inherited IRA and follow the 10-year distribution rule (or stretch rules if they're an Eligible Designated Beneficiary).
Important Disclaimer
This calculator provides estimates for educational purposes only. Tax laws are complex and change frequently. Inherited IRA rules depend on your relationship to the decedent, account type, and timing. This is not tax, legal, or financial advice. Consult a qualified CPA or estate attorney for your specific situation before making any inheritance decisions.
Your Parents Worked Hard for This. Honor Their Legacy.
An inheritance represents a lifetime of someone's work. Protect it from market crashes and inflation with physical gold - a safe haven that holds value for generations.