Inheriting a home has been described as a bitter-sweet experience… You are left with great property value you can use to improve your life, but you are still mourning the loss of a loved one. So you may tend to ask yourself at this point “what are the tax consequences when selling a house I inherited in Wichita Falls Texas?” In the United States, the tax laws have been designed so that they will not add any more burden to you upon inheriting the property. This implies that the financial consequences are less daunting than you would expect, which is good news. 🙂
Tax Consequences when selling a house I inherited in Wichita Falls, Texas
Calculation of basis
To comprehend how you’ll be taxed for having inherited a home, you need to know how the basis is calculated. Basis, in this case, refers to the asset cost for the purpose of the calculation of capital gains along with other taxes. When a person dies, the value or basis of their property in Wichita Falls 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 was worth $100,000 at the time of their death, that property would be valued at the latter amount for calculating capital gains. This calculation is based on what’s called a stepped-up basis. Investopedia defines stepped-up basis as:
Step-up in basis, or stepped-up basis, is what happens when the price of an inherited asset on the date of the decedent’s death is above its original purchase price. The tax code allows for the raising of the cost basis to the higher price, minimizing the capital gains taxes owed if the asset is sold later.
This stepped-up basis provision typically applies to financial assets like stocks, bonds, mutual funds, and business equipment, along with real assets like houses and land.
Taxation of gains/losses
Capital gains or losses refer to what you earn (or lose) from selling property that you use for either personal or investment purposes. Such can be houses, furniture, and many more things (even art and antiques). If you decide to sell an inherited home in Wichita Falls, 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 must have held that property for at least a year. However long you have owned 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 – usually federal and state reporting applies. We recommend you consult a knowledgeable Certified Public Accountant (CPA) to benefit from their expertise on these important matters.
Having an inherited home can be stressful, given that you have new property to take care of and pay taxes for it at the same time… You should go through the probate process in Wichita Falls as the first step to selling your home. The court will then authorize you to proceed as you wish. If any other individuals are involved in the inheritance, you should first agree with each other on that decision. You can then file a petition requesting the court to allow you to sell the property.
In Wichita County, it is helpful to contact the County Clerk. The County Clerk oversees many of the standard filings necessary to record wills and facilitate the probate process.
You should then consider how much tax you are to pay. This will be paid against the capital gains or losses resulting from the sale of the house. You can call TruTex Properties, LLC now at (940) 283-0737 to undertake a smooth and legitimate sale of your home. We are local here in Wichita Falls Texas and we know the market here better than anyone else. If you are still asking yourself what the tax consequences when selling a house I inherited in Wichita Falls are, then we would be happy to discuss it with you in more detail.
Once you inherit a property, you’re responsible for property taxes, any utilities, and general upkeep. The last thing you want is the city citing you with violations for high grass or improperly secured structures. The city can even place a lein on your property if they have to do any work on your inherited property. Selling an inherited house can relieve you of quite a burden. Selling the property to an investor is a basic simple, fast process. Contact us for inquiries on how to go about things when selling your home in Wichita Falls, and we will be glad to help you.