If you sell an inherited house do you pay taxes? Hey guys, this is Brad Woodall with Georgiaprobateresource.com and Arborviewhomebuyers.com. We’re a real estate solutions company specializing in probate and inheritance houses. We buy houses for cash or we can help you list the house on the market the traditional way.
So that’s a great question. When you and inherit a house, do you pay taxes? Well, you have to pay taxes on capital gains. I’m going to also stop here and say you should consult a CPA. I am not a CPA. I’m not a tax professional. You should consult a tax professional about this. But generally speaking, if you check out some of our other videos you need to pay close attention to, there’s a thing called a step up in basis, and that is an estate benefit for when you inherit assets in an estate you typically step up the basis of the property. What’s basis? Well basis is the best word to describe it as what you have in it. So what you paid for it, plus improvements and so forth that you’ve made, money you’ve spent on the house, et cetera, et cetera, that’s your basis on the house. That’s your bottom line. So you need to pay attention to your basis, and CPA can help you calculate your basis. There’s IRS tables out there on irs.gov or resources, documents, forms, all that stuff that can help you figure out what your basis in a property is.
Once you know what your basis is, then there’s a step up in basis. So basically when you inherit the property, your basis steps up to whatever the current market value of the property is at that time. So in reality, if you inherited a property this week and you stepped up the basis to, let’s say, $400,000 and you sold it next week for $400,000, you did not have a capital gain because your basis stepped up. You didn’t actually make a capital gain, the difference between the basis over here and what you sold it for over here because they were the same. Now, if there is any difference between that you may have a capital gain and you need to consult your CPA about what your taxes are on that capital gain and that’s unique to everybody and everybody’s tax situation. So I can’t answer that here on this video.
The other thing to look out for is there are exemptions in estate taxes. So basically most estates are exempt up to a certain amount. So you want to pay attention to that exemption amount and how that applies to you and how that applies to the estate that you’ve inherited based on the value of the assets. So, pay attention to that exemption amount and pay attention to the basis, and that will tell you how much you actually might owe in taxes. And again, again, again, I’m going to repeat this again, you should consult a CPA. It is not a bad thing to pay a CPA money. And make sure you hire a good CPA, don’t go to one of these tax preparation companies out there. Go to a real CPA who actually knows what they’re doing. I employ CPA, I’ve had the same CPA for years, and my CPA saves me so much money in taxes. He pays for himself over and over every year in knowing the tax code because it’s so complicated. I’m not going to get on a political rant here, but if we want to improve this country, we should simplify the tax code, not make it more complicated, but that’s a whole different conversation.
So, that’s basically the answer to this. Pay attention to that step up on basis and pay attention to the estate tax exemptions and that’ll help you calculate your taxes on what you might owe on a property if you sell it.
So thanks again, guys. Again, I’m Brad with arborviewhomebuyers.com, Georgiaprobateresource.com. We’re a real estate solutions company. We can buy your house, make you a quick fast cash offer, make it fast and easy and as simple as possible. Or we can help you list the property the traditional way. I’m a real estate agent in Georgia with One Source Realty, and we can help you list that property that way. So thanks again guys. We really appreciate your time and we hope you have a nice day. Bye-bye.
If you sell an inherited house do you pay taxes?
This is Brad Woodall from probateresource.com and Arborviewhomebuyers.com. Our company specializes in real estate solutions for probate and inheritance houses. We offer cash purchases for houses or we can assist you in listing the house on the market through traditional channels.
If you inherit a house, you may wonder if you must pay taxes.
The answer is that you need to pay taxes on CAPITAL GAINS. However, it’s important to note that you should consult a CPA or a tax professional for specific advice on this matter.
Generally speaking, when you inherit assets in an estate, there is a thing called a STEP-UP IN BASIS. This means that the basis of the property is adjusted to its fair market value at the time of inheritance.
BASIS refers to what you have invested in the property, including what you paid for it, any improvements you made, and any expenses you incurred related to the house. Your basis is your bottom line. Therefore, it’s crucial to pay attention to your basis, and a CPA can help you calculate it. You can find useful information and resources on the IRS website to help you figure out your basis in a property.
Step-up In Basis
If you inherit a property, your basis for the property steps up to the current market value at the time of inheritance. This means that if you sell the property shortly after inheriting it for the same value as the stepped-up basis, you will not have any capital gains. However, if you sell it for a higher value, you may have a capital gain. To determine the taxes on any capital gain, it is best to consult a CPA as tax situations differ for each individual.
Estate Tax Exemptions
It’s important to be aware of estate tax exemptions. Most estates are exempt up to a certain amount, so it’s essential to pay attention to that exemption amount and how it applies to your situation and the estate you’ve inherited based on the asset value. Knowing the exemption amount and the basis will help you determine the actual amount of taxes you may owe.
It’s highly recommended to consult a good CPA who knows the ins and outs of the tax code, instead of relying on tax preparation companies. A good CPA can save you a lot of money in taxes and pay for themselves in the long run. Simplifying the tax code could be a way to improve the country, but that’s a different topic altogether.
Bottomline
So, to sum it up, to calculate the taxes you might owe on a property if you sell it, pay attention to the step-up in basis and estate tax exemptions.
Thank you again, I’m Brad from arborviewhomebuyers.com and probateresource.com. We are a real estate solutions company that can quickly buy your house for cash or help you list it traditionally. As a real estate agent with One Source Realty in Georgia, we can assist you with the property listing process.