Can I Exclude Gifts and Inheritances from My Income?

Yes — gifts and inheritances are generally not included in your taxable income as the recipient. You don't pay income tax on a $50,000 inheritance from a parent or a $5,000 cash gift from a relative. The giver may have gift tax filing obligations if the gift exceeds the annual exclusion ($18,000 in 2024), but even then, gift tax is rarely actually owed. However, if you inherit an investment or property and later sell it, the capital gain is taxable — and your basis is typically the "stepped-up" fair market value at the date of death, which minimizes the gain. Income that the inherited account or property generates after you receive it (like dividends or rent) is always taxable.