Generally, the absolute best thing the administrator of an estate that has real estate in it can do, is to get an appraisal on that property as soon as possible, if one was not done within at least a year before the passing of the original owner.
Financial Planning: For beneficiaries or heirs, estate appraisals can be valuable in financial planning. They provide an accurate understanding of the assets they've inherited, aiding in decisions related to holding, selling, or managing these assets.
Start by requesting the recent tax assessment records from the county clerk's office. While assessments that haven't been adjusted in years can't help you determine the property's value, the IRS allows heirs to use the home's assessed value on the date of the owner's death for cost basis.
Why Do You Need an Appraisal for Stepped-Up Basis? To accurately determine the stepped-up basis of inherited property, a professional appraisal is necessary.
When a house is transferred via inheritance, the value of the house is stepped up to its fair market value at the time it was transferred, according to the IRS. This means that a home purchased many years ago is valued at current market value for capital gains.
Upon selling an inherited asset, if the inherited property produces a gain, you must report it as income on your federal income tax return as a beneficiary.
In most cases, an inheritance isn't subject to income taxes. The assets passed on in an investment or bank account aren't considered taxable income, nor is life insurance. However, you could pay income taxes on the assets in pre-tax accounts.
Inherited properties can come with financial responsibilities such as existing mortgages, unpaid property taxes, maintenance costs, and insurance requirements. Be aware of hidden costs, including emergency repairs, property management fees, and legal expenses.
The basis of an inherited home is generally the Fair Market Value (FMV) of the property at the date of the individual's death. If no appraisal was done at that time, you will need to engage the help of a real estate professional to provide the FMV for you. There is no other way to determine your basis for the property.
Put simply, assessed value is the amount your local government thinks your home is worth; it's what is used to determine property taxes. Appraised value, though, is the amount a professional home appraiser thinks your home is worth; it's typically used by lenders when considering a mortgage application.
Most employers fill out a new appraisal form for each performance review. Highlight the employee's greatest achievements during the review period. Include what projects the employee successfully completed or what they did well.
Before the proposition narrowly passed in 2020, parents could pass down their home and their very low property tax rate to their children. But Proposition 19 changed that. Now, the property's value gets reassessed at the time of transfer, and the property taxes could rise along with it.
Just keep your communication to the appraiser about the facts of the home and neighborhood, how you priced the house, and any other relevant information you think the appraiser should know. And remember, don't discuss value. Don't pressure the appraiser to 'hit the value' and you'll be fine.
It depends on your personal circumstances. If you want to live in the home or use it as a rental property, keeping it obviously makes sense. If you don't want to do either — or if it needs significant work that you don't want to commit to — selling it will make more sense.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
The straightforward answer is no, and there is no specific time limit on selling an inherited property. However, certain factors will influence the timeline of the sale process. Understanding these nuances is key to ensuring a smooth and compliant sale.
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
If you are inheriting a house that is paid off, in most cases, you will still need to go through probate. Some states may allow you to bypass probate if a quitclaim deed was executed properly. However, it is likely that you will still need to go through probate even if you are inheriting a house with no mortgage.
Your share of sales proceeds (generally reported on Form 1099-S Proceeds From Real Estate Transactions) from the sale of an inherited home should be reported on Schedule D (Form 1040) Capital Gains and Losses in the Investment Income section of TaxAct.
Medium inheritance ($100,000)
If you receive a larger inheritance, first consider the recommendations above—fund an emergency savings account or pay off credit cards and loans. You can also use a portion of the money to pay off all or part of your mortgage or pay down student loan debt.
If you inherit a house, changing the deed is one of the first things you'll want to do. It's an important step that ensures your name is on the deed and proves your legal entitlement to the property moving forward. Here's a step by step guide that breaks down this process.
Inheriting a home entails a range of financial responsibilities that can quickly add up. Property taxes, insurance premiums, ongoing maintenance costs and unexpected repairs can significantly strain beneficiaries' financial resources.