What are the tax consequences when selling a house inherited in Baltimore?

Inheriting a house can sometimes be an emotional rollercoaster.  On one hand you have been left with property value that may improve your life but on the other hand you may be grieving the loss of a close family member or friend.  At Lucky Home Buyers, a real estate consultant in Baltimore, MD a question we get asked all the time is “what are the tax consequences when selling a house inherited in Baltimore?” At first, you may be feeling overwhelmed by the entire process, but our team can help you understand and navigate these seemingly turbulent waters.

The Different Tax Consequences When Selling a House Inherited in Baltimore

Taxation on Gains or Losses

For the purpose of income tax, if you decide to sell an inherited house in Baltimore it will be considered and treated as a long-term capital gain or loss.  This refers to what you earn (or lose) from the sale of the house.  You are taxed on the difference between what the property was bought for (the basis) and what the property sold for.  You have a capital loss if you have never lived in the house and sell the asset for less than your basis.

How is the basis calculated?

When a person dies, the value (basis) of their property in Baltimore is increased to the current market value at the time of their death.  The capital gains taxes owed are based on gains above the property value at the time of the decedent’s death, not what they paid originally for the house.

 

 

What are the tax consequences when selling a house inherited in Baltimore?

Reporting the sale of the inherited house

When selling an inherited home in Baltimore it is required to report the sale and the gains or losses when you file your income tax returns.  Capital gains and deductible capital losses are reported on Form 1040, Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040, U.S. Individual Income Tax Return.

Having an inherited home can be, understandably, stressful given the fact that you have new property to take care of and pay taxes for it at the same time.  There are other rules such as allowing for a “special stepped-up basis” that may seem complicated.  We here at Lucky Home Buyers lift your burden and help you understand the process seamlessly.

About Lucky Home Buyers

At Lucky Home Buyers, we have over 25 years of experience providing win-win solutions to help homeowners get out of their sticky situations. Issues such as foreclosure, owning a burdensome property, probate, or anything else, we focus on providing you with a compassionate solution to your situation so you can continue to do the things you love. 

We can help relieve the stress and pressure of going through the items of the deceased homeowner.  We always say to take what items you want and leave the rest, as we’ll remove anything left.

If limited funds to open and close an estate are an issue, we have a special program to help upfront the needed money to start the process or we can take the lead and handle the entire process for you.