We have written many words about inheriting a house, but not much about the tax consequences of selling an Inherited house. The tax implications can seem confusing. Most people don’t know what they are going to do with an inherited house. Before you try to sell a house you’ve inherited, make sure you have the answers to your most important tax questions.
Ordinarily, 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.
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, you determine your taxable gain or loss by whether the sale price is higher or lower than the stepped-up basis.
For example, if you inherit a house that has an appraised 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 you inherit a house and sell it for less than its fair market value, 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.
Try calling Styl Properties, Inc. 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.
Styl Properties, Inc. 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! Styl Properties, Inc. 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.
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. We offer the simple truth about your home and how we can help you sell it fast to resolve any situation.
If you’d like to give us a ring, we would be more than happy to spend some time with you to help you understand the process and to get all of your questions answered. You can reach us at 402 999.0577.