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Coloncologne OP t1_j3mc0m9 wrote

Reply to comment by anotheralpaca69 in [OC] Every $ I spent in 2022 as a 26M living in Washington, DC by Coloncologne

Inheritance is a dollar amount I received from a deceased family member and it's not taxed. I wanted to make that clear so I thought I would include it separate from taxable income but as another person mentioned it probably makes more sense to include it further up the waterfall.

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CookieEnabled t1_j3nesq7 wrote

Is it generally not taxed?

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ShellYonce t1_j3oia3o wrote

CFP here (Certified Financial Planner). Inheritance is generally not taxed to the person who receives it. The deceased has to pay estate tax if their estate (everything they leave behind) is over $12,290,000. This amount is set by Congress and people try to avoid going over this amount as estate tax is super high (up to 40%!)

One strategy to avoid estate tax is through gifting. There is an annual gift amount that people can give while living that doesn’t count toward the exemption. This year it’s $17,000.

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CookieEnabled t1_j3p2ig7 wrote

So after I win that $1B MegaMillions (about $340M after 40% federal and state income tax of the cash option), I still have to pay estate tax?

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ShellYonce t1_j3p33k1 wrote

If you die with more than $12.29M in your estate then yes. Now there are some ways to get money out of your estate. You could put it in an irrevocable trust, but then you don’t have access to the funds (hence irrevocable) or you could give it all to charity. Prolly other things, but that’s above my pay grade.

OR Congress could increase the estate exemption amount, which lots of wealthier folks would support.

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mikevago t1_j3o7dch wrote

The U.S. only taxes inheritance over a certain amount (and that's well over a million dollars). Republicans talk about the "death tax" as if it's crushing the common man, but it's a millionaire's tax that very few people pay.

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