The Tax Consequences of Inheriting a House

The Tax Consequences of Inheriting a House


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The Tax Consequences of Inheriting a HousePeople of Ft Wayne often ask me about inheriting a house. One of the first questions is about the tax consequences of inheriting a house. They worry about inheritance taxes and estate taxes. Then most people don’t know what they are going to do with an inherited house. Should they fix it up, live in it, rent it, or sell. Before you try to sell a house you’ve inherited, make sure you have the answers to your most important tax questions.

The Tax Consequences of Inheriting a House

Does the Home Sale Tax Exclusion Apply to Inherited Property?

When you sell your home, the tax law gives you an exclusion of $250,000 (or $500,000 for married couples filing jointly). That means you don’t have to pay taxes on the first $250,000 (or $500,000) of profit you gain from the sale of the house.

However, when you sell inherited property, you don’t qualify for that tax exclusion. In order to qualify, you would have to live in the home for at least two years, using it as your primary residence.

So the short answer is no, you won’t qualify for the $250,000/$500,000 home sale tax exclusion.

What Are the Stepped-Up Basis Rules for Inherited Property?

You do qualify for a stepped-up basis. Under ordinary circumstances, the “basis” of a property is its cost or purchase price. But in the case of inherited property, the “stepped-up basis” is the fair market value at the time of the owner’s death.

That’s usually a higher number, which can work in your favor. When you sell the property, your taxable gain or loss will be determined by whether the sale price is higher or lower than the stepped-up basis.

For example, if you inherit a house that has a market value of $200,000, and you sell it for more than that amount, you will have a taxable gain. If you sell it for less than that amount, you will have a loss. That’s why you may want to sell the house before the house varies too much from the appraised value at the owner’s death.

If I Sell an Inherited Home, Can I Deduct a Capital Loss from My Taxes?

If you inherit a house and sell it for less than market value at the time of death, you are allowed to deduct the loss from your taxes. That can significantly reduce your tax burden.

However, only $3,000 of losses may be deducted from your income per year. Any additional losses must be carried over to future years.

Keep in mind that if you live in the house before you sell it, it becomes your personal residence, and different tax laws apply.

There is a Fast Way to Sell an Inherited House?

Try calling JT Integrity Properties. It is quick! You can sell house fast in Omaha normally in 30 days or less. That is much quicker than a traditional sale, even if there are no major items that need repair before closing. In most cases when an investor and a seller can agree on a price immediately, they can close as quickly as one to two weeks.

JT Integrity Properties will buy as-is. Worrying about some repairs that you’ll need to fix based on an appraisal? An investor will estimate the repairs needed to restore your property and will purchase the property as-is.

No Fees! JT Integrity Properties doesn’t charge you a real estate commission and may take care of any other nagging financial problems such as back taxes, code violations, or past due water and sewer bills.

FREE information on How to sell your house fast

JT Integrity Properties is here to help homeowners out of any distressed situation.  

As investors, we are in business to make a modest profit on any deal. However, we can help homeowners out of just about any situation, no matter what!  There are no fees, upfront costs, commissions, or anything else.  Just the simple truth about your home and how we can help you sell it fast to resolve any situation.

Give us a call today at 260-202-2222 to let us know how we can help YOU.

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