06 Jul I’m getting a $50K inheritance. What taxes will be owed?

Q. What are the state and federal tax implications after receiving a $50,000 inheritance in New Jersey?
— Heir

A. There are several taxes to be aware of when you receive an inheritance.

First, there is no inheritance tax at the federal level, so there are no tax implications when you receive an inheritance, said Lauren Mechaly, an attorney with Schenck Price Smith & King in Paramus.

But New Jersey does have an inheritance tax.

Assuming the person who died was a New Jersey resident, an inheritance tax is imposed on the beneficiary depending upon the beneficiary’s relationship to the person who died, she said.

“There is no inheritance tax imposed on a `Class A’ beneficiary, which includes a spouse or lineal descendants — children, grandchildren and step-children,” Mechaly said. “Similarly, there is no inheritance tax imposed on charities, which are `Class E’ beneficiaries.”

Inheritances that pass to other family members or friends will be taxed at a rate of 11% to 16%, depending upon the relationship of the beneficiary to the person who died, she said.

There are no income taxes imposed on an inheritance, except for qualified retirement plans as withdrawn, Mechaly said.

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This story was originally published on July 6, 2020.

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