Know the Tax Consequences of Selling Your Inherited House

Inheriting a home can be a good experience for you since you get it without investing anything. This is what most people assume. Do you think this is the whole truth?

If you think so, then you are mistaken! An inherited house also brings some troubles with it, especially when you don’t know what to do with it or are planning to sell it.

A person who has inherited a home and doesn’t know what to do with it, may come across questions like ‘What should I do with this inherited house?’ or ‘What if I sell this house?’ or ‘What factors can act as hurdles in selling my home?’

Well! This is normal. One of the factors that need your attention while selling the home that you inherited is how to avoid paying capital gains tax. But you will be delighted to know that the tax laws have been designed in such a way that they do not pose any unnecessary burden on the beneficiary.

Here, we will talk about the tax consequences and vital information about the capital gains tax on inherited property. Let’s begin!

capital gains tax on inherited property
  1. Basis Calculation

Calculation of basis is required to know how you will be taxed on inheriting a home. Basis means the asset cost used to calculate the capital gains along with other taxes. The value or basis of the property to be inherited increases to the market value when the homeowner dies. For calculation purposes, the value of the property at the time of death is considered.

  • Gains/Losses Taxation

Selling an inherited property is regarded as capital gain or loss from the income tax point of view. Capital gains/losses refer to what you earn from selling the property that you may use for personal or investment purposes. Now, the point comes as to how to qualify for lower rates of long-term capital gains. For that, you are required to hold that property for at least one year. But holding the property for a longer period makes any loss or gain become long-term.

  • Reporting the Sale Amount to the Required Authority

You have to report the sale of an inherited home for income tax purposes. But before doing that, you need to calculate capital gain or loss. The amount that you will get after subtracting the basis from the sales amount is your capital gain or loss. This amount should be reported to the required authorities. This is how capital gains tax on inherited property is calculated.

Selling an inherited house releases burdens that may bother you in the future. If you have inherited a home and plan to sell it but are not aware of capital gains tax exemption in Detroit, Detroit Cash for Homes can help you! We buy inherited houses in the fastest possible manner. Get in touch with us to understand the procedure for selling your inherited home. We will answer your questions!