Are Inherited Assets Taxable in New York?

Do You Have to Pay Taxes If You Receive a Gift?

Somewhat related is the concept of a gift tax. When a gift is made during life, the IRS requires the filing of a gift tax return if the gift exceeds the annual exclusion amount of $19,000 per recipient for 2025. The filing of a gift tax return may not trigger any tax due but is set as a placeholder against the federal lifetime exemption of $13.99 million.

New York State does not impose a gift tax. As long as the giver lives out three years from the date the gift is given, the value will be removed from their taxable estate. If they do not survive the three years, the value of the gift will be added back into the estate when determining the amount of estate taxes owed.

What is the Capital Gains Tax, and How Does it Affect Inherited Property?

Regardless of the value of one’s estate, another type of tax to be aware of is capital gains tax upon sale. This applies to assets that are owned and used for personal or investment purposes, including stocks, bonds, real estate, or cryptocurrency. If these assets grow in value over the course of ownership, a tax on the growth will be paid upon sale of the asset.

Capital gains taxes arise on both the federal and state level. The tax is on the profits made when the property is sold based on the increase in fair market value from the date of purchase or inheritance, otherwise known as the cost basis. Inheritance of a property creates a reset of the cost basis. Upon the death of the owner of the property, the basis will be the date of death value rather than the original acquisition amount.

For example, a stock is purchased at $20 and increases in value to $50. If sold during the lifetime of the owner, there would be a capital gains tax owed on the $30 gain in value of that stock. In contrast, if the original purchaser held onto the stock for their life, and it gets sold after their death, the basis would be the $50 date of death value and, if sold immediately, could result in little or no tax. The lesson here is to be careful with lifetime gifting as this will eliminate the availability of the step up in cost basis at death.

Get Advice to Avoid Unexpected Tax Consequences

Minimizing or eliminating taxes on an estate during life and at death is complicated. There are several taxes to consider, and a prudent person should be sure to get the proper advice to make certain that the elimination of one tax does not increase taxes in another area.

By Britt Burner, Esq. & Erin Cullen

Britt Burner, Esq. is a Managing Partner at Burner Prudenti Law, P.C. focusing her practice areas on Estate Planning and Elder Law. Erin Cullen is a graduate of the Maurice A. Dean School of Law at Hofstra University. Burner Prudenti Law, P.C. serves clients from New York City to the east end of Long Island with offices located in East Setauket, Westhampton Beach, Manhattan, and East Hampton.