Cost basis refers to the cost of the property adjusted for improvement and can be adjusted up or down for other reason. The IRS has various methods of calculating and tracking cost basis. Read here for more information to determine your cost basis.
What happens when you sell a property in a trust? This reader wants to know about the $250,000 gain exclusion and other tax implications. Q: My wife passed away this past year and our home is titled in her trust with me as trustee and my children as beneficiaries upon my passing. Is my cost [...]
Do appliances increase the cost basis of your home? The short answer: it depends on your situation. Q: How can you say, as you did in a recent newspaper article, that putting in a new washer and dryer is an expense that would increase your basis in a condo? Aren't appliances simply replacements rather than [...]
How to determine taxes after selling an inherited home. When selling an inherited home, especially if it's out of state, consider how it'll impact taxes. Q: We live in North Carolina but I also own a home in New York City with my four siblings. We inherited the home from our parents and now each [...]
A sibling asks about having a brother move into his widowed mother's now vacant home to facilitate buying homeowners insurance. The family plans for the brother to buy the home but he can't afford it until he receives his share of the estate. It's a good idea to have the brother move into the home to help buy homeowners insurance, but it might not be necessary to sell him the home right away.
How do you calculate cost basis on a home you receive through a quit claim deed? The type of home ownership is also a factor - for example joint tenancy. Learn how to do the calculation for cost basis and learn the rationale used to determine cost basis when families transfer home ownership using a quit claim deed.
Can a daughter's name be added to the deed of her home since the daughter has started to make mortgage payments for her parents? While it may seem like a good short-term solution, there are many implications to the daughter assuming the mortgage. How can they protect both the parents and the daughter in the transaction? There have been incidents where the children assuming the mortgage have evicted their parents. Another option is to add the daughter's name to the house deed in addition to the names of the parents.
Learn about property estate planning including repair and maintenance duties. Is using a quit claim deed or an irrevocable trust a better option? Inheriting property saves more on taxes than signing a quit claim deed.
Whenever a home owner transfers all or part of the ownership of a property using a quit claim deed, the person who they're transferring ownership to receives the property interest at the same cost basis that the home owner bought it for. While the percentage of ownership may vary, the cost basis used remains the same regardless of when the transfer takes place. As a result, when you sell a home that you receive through a quit claim deed you'll owe capital gains taxes calculated using the previous owner's cost basis.
If a property is transferred on death the tax basis is the value of the property on the day of the transfer. If the new owner sells the property right away she will pay no tax. If the estate is larger than the current amount one can pass down tax-free, the estate would pay any taxes owed, not you.
As parents, you may decide you want to pass on your real estate holdings to your children. To figure out the right way to pass along property, without incurring excessive taxes or mortgage liabilities, you should do some estate planning with the help of an estate attorney and accountant. When you change the title of a property to the name of your children without proper planning the cost basis becomes the property's original value as opposed to that on the day of your death.