Tax Consequences Of Inheriting A House And Selling It
Posted on: 23 November 2015
If your parents died and left you their house, you may want to find a way to sell it quickly, and you could do this by finding a company that buys homes. By selling it quickly, you can avoid having to pay the expenses on the house, such as homeowners insurance and utility bills; however, you should also realize that you could end up with tax consequences when you sell it. Here are two important things to understand about selling the inherited home you now own.
How the inherited house transfer may affect you
When you inherit a house, you probably will not have to pay federal taxes on the gift, unless the house is worth millions of dollars. This is because of the American Taxpayer Relief Act of 2012. This act eliminated the federal taxes on inherited homes and other types of inheritances, except for inheritances over a certain amount. This amount changes each year, but is usually around $5 million.
Each state has different rules relating to state taxes you may owe when you inherit homes and other assets. You can determine the rules that apply to you by seeking help from a real estate attorney.
The taxes you may have to pay when you sell it
If you decide to sell the house, you may end up owing capital gains taxes on the house. Capital gains on inherited homes work differently than on homes people purchase and then sell.
When you inherit a house, the purchase basis for the house is the current market value of the home. In other words, the basis for your capital gains taxes is not the amount your parents paid for the house; the basis changes from the amount your parents paid to the current value of the house.
Once you find a buyer, you will only have to pay capital gains on the difference between the amount you sell it for, and the fair market value of the house when you inherited it. If you sell the house for its current value, you will not have to pay any capital gains taxes on the inherited house.
If you want to avoid having to manage an inherited house and pay for the expenses relating to it, you should find a company that offers quick home sales. Quick sale home buyers will purchase almost any house, and they specialize in buying inherited homes. To learn more, contact a quick sale home buyer in your area today.
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