What are the tax implications from receiving proceeds from the sale of a house that was left as inheritance?

Question

Are there capital gains taxes? Does this get added to total income?

Answer 1

Whenever you inherit property in the U.S., the property's value for capital gains purposes is "stepped up" to the value at the date of death. For example, your relative bought a house 40 years ago for $25,000. At the date of their death, suppose it is valued at $250,000. That will be your "basis" in the house. If you sell it for $260,000 after fees, then you will owe taxes on $10,000. The $10,000 should be treated as long-term capital gains.

Answer 2

You need to know the date you inherited the house and its dollar value at that time. If you kept it over a year then any gain would be long term which is 5% in 2007. Example; you inherited a house over one year ago that was worth 100,000; you sold it for 120,000; thereby giving you a long term gain of 20,000 that has to be included on a sch D with your tax return. The 20,000 would only be taxed at 5% this year.