Determining Taxes on Inherited Homes
REM # A672
By Ilyce R. Glink
Summary: A reader is inquiring about how the market value of real estate is determined as it applies to inheritance tax. Ilyce discusses capital gains and losses in terms real estate inheritance.
Q: My mother lives in South Carolina, and she just inherited the home in Georgia
that my Grandmother lived in before she died.
My mother is planning to sell the house to my cousin. What can she expect to
pay in the way of capital gains taxes? Is there a standard percentage?
A: My condolences on your mother's loss.
When you inherit real estate, you inherit it at its current market value. If
you sell it on the day you inherit it, for its current market value, you would
owe nothing in terms of capital gains because you wouldn't have made a profit
on the sale.
For example, let's say the house your mother inherited is worth $200,000. If
she turns around and sells it to her cousin for $200,000, there are no capital
gains, so no tax is owed.
If the house was worth $200,000 but she owns it for one year and then sells
it to her cousin for $300,000, she would typically owe 15 percent on the $100,000
in profits, or $15,000. If she owns the property, she would have $285,000 in
cash after closing on the sale to her cousin. If she sold it before having owned
it for one year, she would pay tax at a much higher rate because it would be
considered ordinary income.
For more details, please consult with a real estate attorney.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO
Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted,
resyndicated or redistributed without written permission from the publisher.
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