Taxes on inherited house?

Question

I really want to do my taxes by myself, but I don't know exactly how this works..... My 2 siblings and I inherited a house after my father passed away 41/2 years ago. We had it appraised at the time of his death for $101,000. I put $15,000 into the property and put up new siding, built a redwood deck, put in new flooring, painted, ect.

We ended up selling it with a realtor for $137,000. The difference between the sale price and the value at the time of his death minus the realtor expenses is about $28,500 or $9500 each.

Can we deduct any of the money that we put into the house? Also, what are the requisite forms we will need to fill out to file taxes on the sale of the house?

Thanks for your help!

Answer 1

You get the stepped up basis on the home as of the date of your father's death. Since you had it appraised at that time, your basis of $101k is easy to justify. Then you add the costs of the improvements, bringing your basis to $116k.

Now take the sales price and deduct the sales commissions and other closing costs to arrive at your net proceeds on the sale.

Subtract your adjusted basis ($116k) from the net proceeds above to arrive at the gain on the sale.

Since there were 3 owners, you each claim a long-term capital gain of 1/3 of the total gain on the sale. That will be taxed at the lower long-term capital gains rate, normally 15%.

Answer 2

Bostonian is correct as to gain. If the house was really sold by his estate or trust a Form 1041 is required to report the gain taxed to each of you. A Form 1099-S was issued for the sales proceeds - what tax ID number is on it.

Answer 3

If you did own the house for two years then you don't have to pay capital gain taxes up to $500,000. I know this for sure on primary residence , but if you do own another not sure. Turbo tax is how I do my taxes and it answers all these questions and more.