Taxes on House Inheritance
I have what I hope is a simple question. My mother passed away this year and I have inherited her house as part of my half of her estate. Will there be any state or federal tax issues due to the transfer of the house from her name to my and my wife's names? There is no mortgage on the house and it was appraised by her estate at $525,000. We plan on staying in this house for a minimum of 10 years.
Any help on this issue would be greatly appreciated.
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posted by Jeffrey D. Voudrie @ 12:25 AM
3 comments
3 Comments:
If the home was inherited as part of settling her estate then it isn’t considered a gift. As an inheritance, you don’t pay any taxes upon receipt.
The house also receives a stepped-up basis. That means that whenever you sell it you will only pay capital gains taxes on the difference between the sales price and the market value when you inherited it.
If you live in the home and it becomes your primary residence for two out of the last five years then up to $500,000 of gain (for a married couple) can be excluded as part of the lifetime exception.
Thank you very much for your help. One more question if it's not an imposition. How do I handle this situation on my federal and state tax returns? Or should I contact a tax professional in my area for help?
It’s my understanding that there isn’t anything that you need to do on your taxes until you sell the home, unless you begin to use it as a rental. That then affects a lot of things. It’s always a good idea to consult a tax professional.
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