Taxes on an inherited home
When selling a house, one can expect to experience some sort of a tax consequence. The type of tax consequence will depend on the state you live in and the laws associated to selling property. Taxes could result due to the sale of the home, or on the inheritance of the property itself. There are a few things to be aware of when it comes to taxes. Some of these things could have a big impact on your taxes. You will want to take advantage of the possible benefits available in terms of reducing any tax consequences.
The Home Sales Tax Exclusion
Most people who have inherited a home may not be able to qualify for this tax break. The reason is that this tax only applies to those people who have lived in the house for at least two of the five years preceding the sale of the home. For a single person that amount is up to $250,000. For a couple, the amount is $500,000. One would have to live in the inherited house for a minimum of at least two years before being able to qualify for this tax break. Some individuals are not in a position to live in the inherited house.
Stepped up tax basis
The stepped up tax basis is more likely the scenario that most people with an inherited house can take advantage of. This is where the value of the home is calculated from the date of the original owner’s death, not from the date when the original owner first purchased the property. This is beneficial in the sense as the inherited owner, you will have some capital gains tax from the value when inherited, not from the value when the owner first bought the property. This can be a huge savings as more than likely the inherited house has increased significantly in value from when the original owner bought it, especially if this house was purchased many years ago.
Implications from IRS
Everyone must follow any and all rules of the IRS with regards to reporting income from selling an inherited home. A professional will reinforce this recommendation. The sale proceeds are considered taxable income and need to be reported. It would be wise to refer to the IRS website to find the correct forms and information needed to properly report on this income. It is important to note that even if no taxes are owed, it would still be smart to report to the IRS that the inherited home was sold.
All states have different requirements and laws, so it is always best to seek the advice of an expert. You want to make sure that you are paying and reporting the proper taxes to avoid costly penalties down the road. Professional services can help you avoid costly mistakes.
If you want to sell your inherited home easily contact us today! We will point you in the right direction.
Call us at 240-801-6055 or visit http://inheritedpropertycash.nichebuildersite.com