Inheriting a home can be a bittersweet experience. It’s unfortunate that you just lost a loved one, but knowing they left something valuable behind for you is a great feeling. Before even thinking about what you’re going to do with the home, it’s important for you to ask yourself “what are the tax consequences when selling a house I inherited?” The tax laws are designed in a way to potentially not add any more stress to your plate. This implies that the financial consequences are less daunting than what you would expect, which is good news for you. 🙂
Tax Consequences when selling a house I inherited in Dallas, Texas
Calculation of basis
A home’s tax basis is determined in a different way when someone inherits a home after the owner dies. In order to understand how you’ll be taxed when you have inherited a home, you need to know how the basis is calculated. When a person dies, the value or basis of their property is increased to the market value at the time of their death. For instance, if a person purchased a home 20 years ago for $25,000 but it was worth $100,000 at the time of their death, that property would be valued at the latter amount for the purpose of calculating capital gains. So, if you sell it 12 months after they pass for $150,000, then you need to pay capital gains tax on the $50,000 gain. The bottom line is that if you inherit property and later sell it, you pay capital gains tax based only on the value of the property as of the date of death.
Taxation of gains/losses
Capital gains or losses refer to what you earn from selling property that you use for either personal or investment purposes. For example, it can be a house, a car, furniture, and a variety of different other things. If you decide to sell an inherited home, that sale is regarded as capital gain or loss for the purpose of income tax. In most cases, for you to qualify for lower rates of long-term capital gains, you are required to have held that property for at least a year. However long the duration you have been in ownership of an inherited home, any gain or loss will still be treated as long-term.
Reporting the sale
Upon selling an inherited home, you have to report it for income tax purposes. You should first calculate your capital gain or loss. This is done by subtracting the basis from the sale amount. You should then report that amount to the necessary authorities.
Having an inherited home can be stressful given the fact that you not only have a new property to take care of, but now you need to worry about paying the taxes for it at the same time… You should go through the probate process in Dallas as the first step before doing anything else. Probate will require a will from the deceased and this process will take the title out of their name and put it into yours. Once the court approves, they will then authorize you to proceed as you wish. If there are any other individuals involved in the inheritance, you should first agree with each other on what needs to be done next. You can then file a petition requesting the court to allow you to sell the property.
Before selling the home, it’s important for you to figure out how much you will owe in taxes if any. You would definitely want to know this before you sell the home, not after. This will be paid against the capital gains or losses resulting from the sale of the house.
If you determine selling is the right thing for you, you can call North Texas Cash For Homes now at 214-761-3150 or fill out our form below to undertake a smooth and legitimate sale of your home. We are local here in Dallas Texas and we know the market here better than most people. We won’t require you to do anything to the home to get it market ready to list and start showing potential buyers. We specialize in buying homes as is and allowing the owners to walk away without having to sink any more money into the home. We can also close as fast or as slow as you need to. Completely up to you and your preference.
Selling an inherited house can relieve you of quite a burden. In addition to that, selling the property to an investor can be a basic, simple, and fast process. Contact us for inquiries on how to go about things when selling your home in Dallas and we will be glad to help you. Also when trying to educate yourself on the tax consequences when selling a house I inherited, it would also be best for you to educate yourself on the process of selling a house you inherited as well.