What Would Happen If I Sold My Parents’ House?
After your parents passed away, did you inherit their house? You might be wondering about the sell inherited house tax implications if you decide to sell their property. Understanding these implications is crucial to managing potential taxes on the property’s value.
When you inherit a home, you won’t have to pay taxes on the entire difference between the value of the house when your parents bought it and its current value. The IRS uses the stepped-up basis approach, which means they consider the house’s worth at the time you inherited it, not what your parents originally paid.
For example, if your parents bought the house in 1970 for $100,000, and it was valued at $700,000 when you inherited it five years ago, your cost basis is $700,000. If the house is now valued at $850,000, the only amount of capital gains tax you would owe if you sold it today is the $150,000 difference between the sale price and the value when you inherited it.
Understanding the Sell Inherited House Tax Implications
The sell inherited house tax implications are significant because they affect how much tax you’ll owe upon selling the property. By using the stepped-up basis, you minimize the taxable gain compared to the original purchase price.
Potential Exemptions and Deductions
In some cases, you might qualify for exemptions or deductions that could further reduce your capital gains tax. For instance, if you lived in the inherited home for at least two of the last five years before selling it, you might be eligible for the home sale exclusion. This can exclude up to $250,000 of your capital gains ($500,000 for married couples filing jointly) from taxation.
Impact of a Decrease in Property Value
If the property’s value decreases after you inherit it, you might not owe any capital gains tax when selling it. However, you won’t be able to claim a capital loss on your taxes unless the property was used as an investment, such as a rental property.
Emotional Considerations
Selling an inherited house can involve more than just financial decisions. The property may have sentimental value, making the decision to sell more complex. It’s important to consider both the emotional and financial aspects.
Seek Professional Advice on Sell Inherited House Tax Implications
If you’re unsure about the sell inherited house tax implications or need professional guidance, don’t hesitate to reach out. Visit Hudack Law Estate Planning Attorney to learn more about our services. We’re proud to serve California, Utah, and Arizona. Call our Toll-Free line at (877) 314-4309 to schedule a consultation with one of our experienced attorneys.