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If you inherit a house, do you have to pay capital gains tax on it?

Asked by: Jesica Hogan 1099 views YA Discussion

Say you inherit your parents’ home. Say they bought it 30 years ago for 35,000. Say at the time of death it was worth 200,000. Do you and any other beneficiaries in the will have to pay capital gains tax in the house? If so, how is the capital gains tax determined? Is it 200,000 minus 35,000 multiplied by .15 (the long term capital gains tax rate)? And then would this total capital gain tax obligation be divided among all of the beneficiaries based on their inheritance share? Thank you for your advice.

How others found here:

  • when siblings inherit/parents house do you have to pay capital gains
  • if you sell an inherited house do you pay capital gai es
  • do you have to pay capital gain when you inherit a house

7 Answers



  1. Quick Answers on Jul 30, 2012 Reply

    Let’s say your last parent didn’t die in 2010.

    Then the valuation rules say you use the value on the date of death for that parent (it can go up, it can go down).

    Using your example, house is worth $ 200K and sold for $ 200K less $ 12K in commissions. On the 1041 tax return, you’d show a $ 12K loss that would be passed through to the beneficiaries as a long term capital loss. (If 4 heirs, each would get a $ 3000 loss that might reduce their taxes by $ 300.)

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  2. MadMan on Jul 30, 2012 Reply

    No. When you inherit anything, the cost basis is the value as of the time that you inherited it. So no, you do not pay capital gains if you sold it immediately.

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  3. tro on Jul 30, 2012 Reply

    when you sell the house you need to know what the value of the house was when you inherited it
    if that figure subtracted from the price of sale, is a gain, yes, you can very likely pay cap gains taxes on it
    and yes, the profit of each one who inherits is determined by their share, of the inheritance and the sale

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  4. coraann on Jul 30, 2012 Reply

    If there are capitol gains to be taxed and paid it is the estate of the deceased person that will be
    responsible for these not the heirs.
    All of this will be reported and paid when the last tax return of the deceased is filed.All of the
    lawyer’s fees and debts if any, and other expenses will be paid by the estate.
    Then,the proceeds will be divided between the heirs.

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  5. Bobbie on Jul 30, 2012 Reply

    The executor administrator of the estate will have to fill out the 1041 estate tax return and and the K-1 for each beneficiary of the estate with the information on it that you will have to use to report that sale of the house correctly on your 1040 income tax return during the tax filing season.
    The administrator may be able to help you to determine your ADJUSTED cost basis of the inherited house and the date that it was inherited by you for this purpose.

    Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2011)

    http://www.irs.gov/instructions/i1041/index.html

    Instructions for Form 1041 and Schedules A, B, G, J, and K-1 (2011)
    Specific Instructions

    http://www.irs.gov/instructions/i1041sk1/ar01.html#d0e69

    Hope that you find the above enclosed information useful. 07/29/2012

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  6. Cathi K on Jul 30, 2012 Reply

    Capital gains is paid after the house is sold. When you inherit the house it is at the fair market value or your parents basis.

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  7. the kid on Jul 30, 2012 Reply

    I am assuming the home is sold by the estate. If cap gains are applicable, yes the ESTATE would pay it, not the heirs. BUt the home is only worth $ 200K, so it is well under the exclusion for a single person.

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