My grandpa left me his small home after he passed away last summer. We are still working on fixing it up and getting it ready for sale. What needs to be turned in to our taxes. We haven't received any monies, but rather, it has cost us for utility bills, repairs, and insurance.
2007-01-21 05:55:41 · 3 answers · asked by Mrs.Blessed 7 in Business & Finance ➔ Renting & Real Estate
The house itself is considered an asset and it was given to you so it is a gift that needs to be declared. The house has an estimated fair market value even if you did not receive any monetary amount. The amount you spend on upkeep and repairs of the property may be considered deductibles on your return.
Talk to a CPA (accountant). The CPA can give you expert advice/information and help you with your tax return.
2007-01-21 06:01:41 · answer #1 · answered by JADE 6 · 0⤊ 1⤋
When you sell the home, your cost basis will be the value of the home when it was deeded to you through probate. The cost of repairs and improvements can generally be added to your cost basis. The utilities you pay in the meantime are not deductible. Until you sell the property, there are no tax implications for the most part. If you are already itemizing your deductions you may be able to deduct the property taxes on it.
When you sell the property, the tax implications will depend upon how long you owned it and whether or not you lived in it as your primary residence. If you move in to it and live there for at least 2 years, you can sell it and exclude up to $250k ($500k if married filing jointly) of gain on the sale. Your stepped up basis probably will mean that your gain will be much less than that and there will be no tax liability.
If you own the home for less than 1 year then any gain will be fully taxable at your marginal tax rate. Your stepped up basis will keep the gain modest so that tax hit shouldn't be too severe.
If you own the home for more than one year but don't qualify for the $250k exclusion because you didn't live in it for 2 years as a primary residence your gain will be taxed at the lower long-term capital gains rate.
2007-01-21 14:59:47 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
The cost for utlities, repairs and insurance, I don't believe is a write-off (may be different because it is inheritance). Anyways, with the sale of the house, you can then claim the repair costs (it is deducted out of your capital gains).
You may want to have an accountant help you with your taxes this year.
2007-01-21 13:59:40 · answer #3 · answered by Jo 6 · 0⤊ 0⤋