Inheritance Tax Calculator
Use a manual inheritance-tax worksheet to compare inherited value, exemption, and rate assumptions for a beneficiary scenario.
Beneficiary Tax Impact Calculator
Free beneficiary tax impact calculator. Estimate federal and state taxes on inherited assets including retirement accounts, stocks, and real estate.
Inherited Assets
Traditional IRA, 401(k)
$
Generally tax-free
$
Stocks, real estate at death
$
Usually equals FMV at death
$
Income-tax-free to beneficiary
$
Tax Rates
%
%
%
Total Estimated Tax⧉
$58,000.00
Effective rate: 12.89%
After-Tax Inheritance⧉
$392,000.00
From $450,000.00 inherited
Tax-Free Portion⧉
$250,000.00
55.6% of total inheritance
Retirement Account Tax⧉
$58,000.00
29.00% combined rate
Investment Capital Gains Tax⧉
$0.00
No gain — stepped-up basis = FMV
SECURE Act Annual Distribution⧉
$20,000.00
$5,800.00/yr tax over 10 years
Tax Treatment Breakdown
Tax-Free 55.6%
Taxable 44.4%
After-Tax Waterfall
Total Inherited
$450,000.00
After Tax
$392,000.00
Total Tax
$58,000.00
Asset-by-Asset Tax Analysis
| Asset Type | Inherited Value | Tax Type | Estimated Tax | After Tax |
|---|---|---|---|---|
| Retirement Accounts (Traditional) | $200,000.00 | Ordinary Income | $58,000.00 | $142,000.00 |
| Investments (Stepped-Up Basis) | $100,000.00 | No tax (basis = FMV) | $0.00 | $100,000.00 |
| Roth IRA / Roth 401(k) | $50,000.00 | Tax-Free | $0.00 | $50,000.00 |
| Life Insurance | $100,000.00 | Income Tax-Free | $0.00 | $100,000.00 |
| Total | $450,000.00 | — | $58,000.00 | $392,000.00 |
SECURE Act 10-Year Distribution Schedule
| Year | Distribution | Tax on Distribution | Remaining Balance |
|---|---|---|---|
| Year 1 | $20,000.00 | $5,800.00 | $180,000.00 |
| Year 2 | $20,000.00 | $5,800.00 | $160,000.00 |
| Year 3 | $20,000.00 | $5,800.00 | $140,000.00 |
| Year 4 | $20,000.00 | $5,800.00 | $120,000.00 |
| Year 5 | $20,000.00 | $5,800.00 | $100,000.00 |
| Year 6 | $20,000.00 | $5,800.00 | $80,000.00 |
| Year 7 | $20,000.00 | $5,800.00 | $60,000.00 |
| Year 8 | $20,000.00 | $5,800.00 | $40,000.00 |
| Year 9 | $20,000.00 | $5,800.00 | $20,000.00 |
| Year 10 | $20,000.00 | $5,800.00 | $0.00 |
Planning notes, formulas, and examples
About the Beneficiary Tax Impact Calculator
When you inherit assets, the tax consequences depend heavily on the type of asset received. Cash and personal property generally have no income tax. Inherited retirement accounts (IRAs, 401(k)s) are taxed as ordinary income when distributed. Inherited real estate and stocks receive a stepped-up cost basis, eliminating capital gains on pre-death appreciation.
This page is a planning worksheet. It helps compare inherited-asset scenarios, but it does not determine the correct tax treatment for a specific estate or beneficiary.
Understanding the tax treatment of each inherited asset type helps beneficiaries plan withdrawals, manage tax brackets, and preserve more of their inheritance. Different assets require different strategies.
This calculator estimates the tax impact of various inherited asset types based on your marginal tax rate.
When This Page Helps
Beneficiaries who understand the tax implications of their inheritance can compare withdrawal timing and asset-mix scenarios more clearly. This worksheet is for planning and comparison, not tax advice.
How to Use the Inputs
- Enter the value of inherited retirement accounts.
- Enter inherited investment values and original cost basis.
- Enter your marginal income tax rate for the scenario you want to model.
- Enter your state income tax rate.
- Review the estimated tax liability by asset type.
Formula used
Retirement Account Tax = Distribution Amount × (Federal Rate + State Rate)
Capital Gains Tax = (Sale Price − Stepped-Up Basis) × Capital Gains Rate
Cash/Personal Property: $0 income taxExample Calculation
Result: $58,000 estimated tax
A $200,000 inherited IRA distributed over time faces combined 29% tax (24% federal + 5% state) = $58,000 in total taxes. Strategic withdrawal planning can reduce this by spreading distributions across lower tax brackets.
Tips & Best Practices
- Inherited IRAs from non-spouses must be fully distributed within 10 years under the SECURE Act.
- Spousal beneficiaries have more options: they can roll the IRA into their own account.
- Inherited Roth IRAs are generally tax-free but must still be distributed within 10 years.
- Consider taking larger IRA distributions in low-income years to minimize taxes.
- Inherited real estate gets a stepped-up basis — selling immediately usually triggers little to no capital gains.
- Charitable beneficiaries pay no income tax on inherited retirement accounts — consider naming charities as IRA beneficiaries.
Asset-by-Asset Tax Treatment
Retirement accounts (Traditional IRA, 401k): fully taxable as ordinary income. Roth accounts: generally tax-free. Real estate: stepped-up basis. Stocks/bonds: stepped-up basis. Life insurance: income tax-free. Cash: no income tax. Each asset type requires a different planning approach.
The SECURE Act Impact
The SECURE Act framework eliminated the "stretch IRA" for most non-spouse beneficiaries, requiring full distribution within 10 years. This change can push beneficiaries into higher tax brackets, making distribution planning critical.
Tax-Efficient Inheritance Strategies
Consider: timing IRA distributions to low-income years, converting inherited traditional IRAs to Roth (paying tax in earlier years to avoid higher future rates), donating inherited IRA distributions to charity via qualified charitable distributions (QCDs), and selling stepped-up basis assets promptly if desired.
Sources & Methodology
Last updated:
Methodology
This page is a beneficiary-planning worksheet, not a legal or tax opinion. It estimates the tax impact of inherited assets by applying the asset type and tax assumptions you enter. The worksheet helps compare inherited-asset scenarios, but it does not determine basis, distribution timing, or the correct state or federal treatment for a specific estate.
Sources
- Publication 559, Survivors, Executors, and Administrators (Internal Revenue Service) — Official IRS guidance on inherited assets, estate administration, and beneficiary tax issues.
- Publication 551, Basis of Assets (Internal Revenue Service) — Official IRS guidance on basis, including inherited property and stepped-up basis treatment.
- Publication 590-B, Distributions from IRAs (Internal Revenue Service) — Official IRS guidance on inherited IRA distributions and taxable withdrawals.
Frequently Asked Questions
Generally no. Life insurance death benefits are income tax-free to beneficiaries. However, if the policy was in the estate and the estate exceeds the federal exemption, estate tax may apply to the proceeds.
Inherited cash is not subject to income tax. However, any interest earned on the cash after inheritance is taxable. If the estate paid estate tax, the beneficiary receives the cash net of that tax.
When you inherit real estate or investments, the cost basis resets to the fair market value at the date of death. This eliminates capital gains tax on all pre-death appreciation. Only post-death appreciation is taxable when sold.
Traditional IRA and 401(k) distributions are taxed as ordinary income to the beneficiary. The SECURE Act requires non-spouse beneficiaries to empty inherited accounts within 10 years of the owner's death.
Beneficiaries typically do not pay estate tax directly — the estate pays it before distribution. The federal basic exclusion amount for 2026 is $15 million, but state estate or inheritance taxes may differ. This worksheet is only for planning comparisons.
Inherited Roth IRA distributions are generally tax-free since contributions were made with after-tax dollars. However, non-spouse beneficiaries must still distribute the account within 10 years. The Roth's tax-free growth makes it an excellent asset to inherit.
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