Q: Do I have to pay POD tax ?
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- California
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A:
In California, when you receive a payable-on-death (POD) account, the money typically isn't subject to state inheritance tax because California doesn't have an inheritance tax. However, the amount you receive may be subject to federal estate tax, depending on the size of the estate.
You should be aware that while California doesn’t impose a tax on inherited funds, the Internal Revenue Service (IRS) may consider the distribution part of the deceased's taxable estate. This can affect the overall estate tax liability, particularly for larger estates that exceed the federal estate tax exemption.
It’s also important to note that any interest, dividends, or other earnings generated by the POD account after the original owner's death may be subject to income tax. This means that while the principal amount received is not taxed, the earnings it generates will need to be reported on your income tax returns.
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