Most inherited property is not subject to federal income tax.

Large estates might be subject to estate tax, but that is paid out of the estate’s assets. If you inherit most types of property, such as stocks, bonds, a house or life insurance proceeds, they are not taxable. However, once you inherit an asset, you will become liable for income tax on any interest, dividends or capital gains it generates.

One exception: If you inherit a pension, Individual Retirement Account or other asset that the deceased did not pay income tax on, unless the deceased was your spouse, you must begin withdrawing money from this account according to a certain schedule, and those withdrawals will be subject to federal income tax. As always, check with a tax professional or IRS Publication 559, Survivors, Executors, and Administrators, available at www.irs.gov.