Do I have to pay taxes on a $100,000 inheritance?

Asked by: Antonette Bogisich DDS  |  Last update: February 2, 2026
Score: 5/5 (66 votes)

No, you generally don't pay federal income tax on a $100,000 cash inheritance, as inheritances aren't considered taxable income, but you might pay taxes if it's from retirement accounts (like a 401(k) or IRA) or if you live in one of the few states with an inheritance tax (like Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania). You also won't pay tax on the inheritance itself, but you will owe taxes on any income it generates (like interest or dividends) or if you sell inherited assets for more than their value at death (capital gains).

How much tax do I pay on 100k inheritance?

In most cases, an inheritance isn't subject to income taxes. The assets passed on in an investment or bank account aren't considered taxable income, nor is life insurance.

How much money can you inherit without paying federal taxes?

You can generally inherit a large amount without federal tax because the federal estate tax only applies to estates over $13.99 million for 2025, rising to $15 million in 2026, with married couples doubling that. The tax is on the estate, not the heir, and applies to the amount above the exemption, but be aware some states have their own taxes, and inherited retirement accounts (like IRAs) are taxed as income. 

What should you do if you inherit $100,000?

With a $100k inheritance, first take time to process emotions and park the money in a high-yield savings account, then create a plan to pay off high-interest debt, build an emergency fund (3-6 months of expenses), and invest for long-term goals like retirement or a home, ideally with a financial advisor to customize a strategy based on your personal financial situation and goals. Avoid impulsive spending and focus on securing your financial future by balancing immediate needs with long-term growth. 

Do I need to report inheritance money to the IRS?

Generally, you do not need to report a federal inheritance to the IRS because it's not considered taxable income for the recipient, but you might owe taxes on earnings from the inheritance (like interest or dividends) or have to report it if it's from a foreign source; state inheritance/estate taxes might apply, and the person handling the estate pays federal estate tax on large estates before distribution, so you often receive it tax-free. 

Do I Have To Pay Tax On Inherited Money? - CountyOffice.org

36 related questions found

How much tax will I pay on a $100,000 gift?

You likely won't pay gift tax on $100k because it falls under the 2025 annual exclusion ($19,000/person) and the large lifetime exemption ($13.99M), but you must file IRS Form 709 to report the gift amount over the annual limit, reducing your lifetime exemption; the tax only applies if you exceed your lifetime limit, using progressive rates (28% for the portion between $80k-$100k). 

Will I get taxed if I inherit money?

Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will.

What would you do if you inherited 100k?

With a $100k inheritance, first take time to process emotions and park the money in a high-yield savings account, then create a plan to pay off high-interest debt, build an emergency fund (3-6 months of expenses), and invest for long-term goals like retirement or a home, ideally with a financial advisor to customize a strategy based on your personal financial situation and goals. Avoid impulsive spending and focus on securing your financial future by balancing immediate needs with long-term growth. 

Can I deposit a large inheritance check into my bank account?

You can deposit a large cash inheritance into a savings account, either by check or by wire transfer to your bank.

How does the IRS know you inherited money?

How does the IRS learn about inherited assets? Inherited assets may appear through estate filings, financial institution reporting, probate documents, property title transfers or tax reporting by executors and trustees.

How to avoid paying taxes on inherited money?

  1. How can I avoid paying taxes on my inheritance?
  2. Consider the alternate valuation date.
  3. Put everything into a trust.
  4. Minimize retirement account distributions.
  5. Give away some of the money.

What is the most you can inherit without paying inheritance tax?

Every individual has a basic Inheritance Tax (IHT) threshold of £325,000, known as the Nil Rate Band. Assets below this value generally pass to beneficiaries free of tax. If the estate is worth more than that, IHT at 40% usually applies on the excess, unless exemptions or reliefs reduce the amount due.

How much can you inherit from your parents before taxes?

As of October 2024, inheritance tax thresholds have been increased: Group A: €400,000 (was €335,000) Group B: €40,000 (was €32,500) Group C: €20,000 (was €16,250)

What is the maximum a person can inherit without paying taxes?

You can generally inherit a large amount without paying federal taxes because the tax is on the estate, not the beneficiary, with a high federal exemption (around $15 million per person in 2026) for the deceased's estate; however, some states have their own inheritance or estate taxes, and inherited retirement accounts (like IRAs) are taxed as income for the beneficiary. For most people, inheritances of cash or property aren't income, but any future earnings (interest, dividends) are taxable, and inherited retirement funds are taxed when withdrawn. 

What percentage of tax do you pay on 100k?

At a glance

If your total income is between £100,000 and £125,140, the tapering of the personal allowance means you could end up paying an effective 60% income tax rate. Almost 725,000 workers will fall into the 60% tax trap in 2025-26, according to HMRC, up from about 300,000 in 2017-2018.

Do you have to report gifted money as income?

No, as the recipient, you generally do not have to report a gift as income on your taxes, as gifts are not considered taxable income for the receiver. The responsibility for gift tax reporting falls on the giver, who must file a gift tax return (Form 709) only if the gift value exceeds the annual exclusion ($19,000 per person in 2025) and their lifetime exemption is exceeded. 

What to do if you inherit $100,000?

With a $100k inheritance, first take time to process emotions and park the money in a high-yield savings account, then create a plan to pay off high-interest debt, build an emergency fund (3-6 months of expenses), and invest for long-term goals like retirement or a home, ideally with a financial advisor to customize a strategy based on your personal financial situation and goals. Avoid impulsive spending and focus on securing your financial future by balancing immediate needs with long-term growth. 

What happens if you deposit $50,000 in cash?

Key Takeaways. The majority of banks don't limit how much cash you can deposit, but all institutions have to report deposits of $10,000 or more to the federal government. It's safest to deposit large sums in person, but you could opt for an armored transport for sums greater than $50,000.

Why shouldn't you always tell your bank when someone dies?

You shouldn't always tell the bank immediately because it can freeze accounts, blocking access for paying bills or managing estate funds, and potentially triggering complex legal/tax issues before you're ready, but you also risk problems like overpayment penalties if you wait too long to tell Social Security or pension providers; instead, gather documents, add joint signers if possible, and get professional advice to plan the notification strategically. 

What is the smartest thing to do with $100,000?

The best thing to do with $100k involves a mix of securing your finances (paying high-interest debt, boosting emergency funds) and investing for growth, often through diversified options like low-cost index funds, ETFs, or real estate, tailored to your goals (retirement, home down payment) and risk tolerance, ideally with professional advice for a personalized strategy.
 

What is the 7 year rule for inheritance?

The "7-year inheritance rule" (primarily a UK concept) means gifts you give away become exempt from Inheritance Tax (IHT) if you live for seven years or more after making the gift; if you die within that time, the gift may be taxed, often with a reduced rate (taper relief) applied if you die between years 3 and 7, but at the full 40% if you die within 3 years, helping people reduce their estate's taxable value by giving assets away earlier.
 

What is the first thing you should do when you inherit money?

The first thing to do when you inherit money is to pause, take stock of what you've received (cash, assets, property), and park it safely in an FDIC-insured account while you avoid major decisions for 6-12 months, then seek professional advice from financial and tax advisors to understand implications and create a plan aligned with your goals, paying down high-interest debt and building an emergency fund are often good next steps. 

Who is exempt from inheritance tax?

Charity exemption

Like the spousal exemption, assets passing to charity on death are exempt from inheritance tax. As such, if an entire estate passes to charity, there will be no inheritance tax due.

What is the inheritance tax limit for 2025?

As of 2025, there is no California estate tax. Your estate will not be taxed by the state of California when you pass away.

Do you have to pay capital gains on inheritance?

The estate of the deceased pays capital gains tax on any increase in property value from the original purchase price to the fair market value at death. Beneficiaries pay capital gains tax only if they sell the inherited property for more than its value at inheritance.