Report the sale on Schedule D (Form 1040), Capital Gains and Losses and on Form 8949, Sales and Other Dispositions of Capital Assets: If you sell the property for more than your basis, you have a taxable gain.
If you inherit property or assets, as opposed to cash, you generally don't owe taxes until you sell those assets. These capital gains taxes are then calculated using what's known as a stepped-up cost basis.
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.
Form 1099-S isn't entered directly into the tax program. Enter the proceeds, the date of the sale, the cost basis of the property, and the date that you inherited the property. In the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other.
Personal Use. If you're reporting Form 1099-S because you sold your primary residence, then you'll report the sale of the home on Form 8949 and Schedule D. If you're reporting Form 1099-S because you sold a timeshare or vacation home, then you'll also report the sale on Form 8949 and Schedule D.
Enter the sale in TurboTax as an investment sale, the same as a sale of stock, but for which you did not get a 1099-B. For the date acquired enter the word "Inherited" instead of a date. TurboTax will make the necessary entries on Form 8949 and Schedule D.
You don't need to report a cash inheritance on your federal return. The IRS doesn't impose an inheritance tax.
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.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
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.
Filing these forms requires detailed information about the transactions, including dates, amounts, and participant details. For 1099-S, this might include the date of closing and sale price. 1099-B requires details of the transaction, such as acquisition and sale dates and cost basis.
Form 8971, along with a copy of every Schedule A, is used to report values to the IRS. One Schedule A is provided to each beneficiary receiving property from an estate. Form 8971 instructions PDF. This item is used to assist in filing Form 8971.
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.
Gain or loss of inherited property must be reported in the tax year in which it is sold. The sale goes on Schedule D and Form 8949 (Sales and Other Dispositions of Capital Assets). Schedule D reports any capital gain or loss on the sale. A gain or loss is based on the step-up in basis, if applicable.
If an estate or trust receives a distribution reported on Form 1099-R, it should be reported as Other Income on line 8 of Form 1041. To enter information reported on Form 1099-R in Form 1041 in TaxSlayer Pro, from the Main Menu of the return select: Income. Other Income.
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.
Some also worry that the home will be sold quickly, against their wishes. And there is good reason to be concerned. If you bequeath a house to an heir or heirs, they will have to make an immediate plan for home maintenance, mortgage payments (if necessary), utilities, property taxes, repairs and homeowners' insurance.
INHERITING PROPERTY
Under Proposition 19, a child or children may keep the lower property tax base of the parent(s) ONLY if the property is the principal residence of the parent(s) and the child or children make it their principal residence within one year.
In general, you will report your capital gains or losses, from inherited property on Form 8949/Schedule D, like other property.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
This means that when the beneficiary withdraws those monies from the accounts, the beneficiary will receive a 1099 from the company administering the plan and must report that income on their income tax return (and must pay income taxes on the sum).
In California, real property is one of the most valuable assets you can inherit from a loved one. But inheriting real estate that has increased in value over time can trigger capital gains tax consequences when you sell that piece of property.
While beneficiaries don't owe income tax on money they inherit, if their inheritance includes an individual retirement account (IRA), they will have to take distributions from it over a certain period and, if it is a traditional IRA rather than a Roth, pay income tax on that money.
Is Form 706 Required for a Step Up in Basis? Form 706 is not required to receive a step up in basis on inherited property. A step up in basis is automatic at the time of inheritance. Even if the property isn't sold, taxes may still be owed.