What Are Inherited Pension Taxes?

What Are Inherited Pension Taxes?

Inherited pension taxes are taxes that apply to a pension a person inherits as part of his income. Typically, inherited pensions are not taxed unless the deceased received payments from the pension while living and the pension would have been taxed if the deceased was still living.

Both of the above cases have to be true for a pension to be taxed. If only one case applies, the pension is not taxable. Many factors go into the tax rate and include the type of pension, the age of the deceased, any payments the deceased received, state law and if the pension was considered to be pre-tax or after-tax for contributions.