Is an inheritance taxable income?

The general rule

The short entry in Publication 525 titled “Gifts and inheritances” begins with a rule most people are relieved to read: in most cases, property you receive as a gift, bequest or inheritance is not included in your income. So the house, the cash in the account or the car that passes to you on someone’s death does not itself go on your income tax return as income. This is a rule about income tax. The publication does not address estate tax, which is a different tax that applies to the estate itself, so this page does not cover it.

Income from the property is yours

The exclusion applies to the property, not to what it earns afterward. The publication says if property you receive this way later produces income such as interest, dividends or rents, that income is taxable to you. If a relative leaves you a rental house, the rent you collect after you inherit it is income, reported in the usual way. If the bequest is stock, the dividends paid after you own it are income. Two more situations are spelled out. If property is given to a trust and the income from it is paid, credited or distributed to you, that income is taxable to you. And if the gift, bequest or inheritance is itself the income from the property, then that income is taxable to you.

Bequests for services

One kind of bequest is treated very differently. If you receive cash or other property as a bequest for services you performed while the decedent was alive, the value is taxable compensation. A caregiver who is left money in a will in return for years of paid or unpaid care, rather than as a gift, is in this category. The label in the will is not decisive on its face; the question is whether the transfer is payment for services, and the publication treats the value as compensation in that case. The same list also addresses a different trap: if you sell an interest in an expected inheritance from a living person, you must include the entire amount you receive in gross income on Schedule 1 (Form 1040), line 8z.

Inherited pensions and IRAs

Retirement accounts do not follow the general rule. Publication 525 says if you inherited a pension or an IRA, you may have to include part of the inherited amount in your income. It sends pension heirs to the Survivors and Beneficiaries section of Publication 575 and IRA heirs to the discussion of what happens if you inherit an IRA in Publications 590-A and 590-B. Because these accounts can hold money that has not yet been taxed, the inherited amount may become income when it is paid out. If that is your situation, see the inherited IRA 10-year rule calculator for the timing rules.

Worked example

You inherit $250,000 of stock from an aunt. The $250,000 is not income to you. During the next year the stock pays $3,400 of dividends; the $3,400 is taxable and goes on your return. Suppose instead that you also receive a $10,000 bequest that the will describes as payment for care you provided to the aunt. That $10,000 is compensation. In the calculator above, enter the inherited value, the income earned since, and tick the services box when the bequest was a payment for work; the result shows what is excluded and what is included. Selling inherited property later can create a gain or loss under the capital gains rules; see the capital gains tax calculator.

Limits of this page

Publication 525 only answers the income tax question. State inheritance taxes exist in some places and the federal estate tax is separate, and neither is covered by the publication or this page. For large estates, the estate and gift tax calculator is a better starting point. Executors and survivors can read Publication 559, which the publication recommends for survivors, executors and administrators.

Sources

• IRS Publication 525, Taxable and Nontaxable Income (2025): the Gifts and inheritances, Inherited pension or IRA, Expected inheritance and Bequest for services entries under Other Items and Other Income. Read November 2, 2026.

Edition read: Publication 525 (2025), for use in preparing 2025 returns. Dollar limits and dates in this publication are for 2025; check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it.