Any money or property you receive as an inheritance or a gift is not considered taxable income. However, if the inheritance or gift is used to produce income such as interest, dividends, or rent, then that income becomes taxable. Individuals who give property or money to someone are subject to a gift tax and must file Form 709 (7-0-9). There are exceptions, however. Generally, you are not taxed for the first $10,000 (ten thousand dollars) you give someone during a calendar year. This amount is double if it's a joint gift from both you and your spouse. You also don't have to pay a tax on gifts made to a political organization, a charity, or your spouse. Tuition or medical expenses that you pay for someone are also considered tax-exempt. For more information on reporting income from inheritances and gifts, consult a tax advisor or call the toll-free number for federal tax information and assistance at 1-800-829-1040.
