Second Home Sale

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Jacs2023irs
Jacs2023irs Member Newcomer
edited October 2023 in Situation & Life Changes

My wife inherited her dad's home in 2012 after his passing. One of her sisters has been living in the house and the cost/headache of keeping the maintenance up on it have become too much for us. We sold the house earlier this year and now wondering how to use FreeTaxUSA's software to do our taxes. I understand that the valuation of the house in 2012 can be used as the basis and then subtracting the basis from the selling price along with any improvements (not sure if maintenance things - fixing roof, a/c/heating system, water heater replacement, etc. can be deducted or not) would be counted as income. Does the basic FreeTaxUSA software allow this?

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  • rachels
    rachels FreeTaxUSA Agent
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    Hello Jacs2023irs,

    Yes, you can use FreeTaxUSA to report that information. As a note, the full version of our software is available to all of our customers without any additional or hidden fees.

    If you did not live in the home and you did not rent it out, you would generally report that in your account by clicking the "Income" tab, then selecting "Stocks or Investments Sold (1099-B)" from the drop-down menu. You will be asked for some information about the sale on those screens.

    -The "Sales Proceeds" will be where you enter the net proceeds from the sale (gross proceeds minus selling expenses). Selling expenses typically include: sales commissions, advertising fees, legal fees, and mortgage points or loan charges you paid that would typically have been the buyer's responsibility, etc.

    -The "Cost or Other Basis" of inherited properly is usually the Fair Market Value (FMV) of the property at the date of the individual's death. You can read about the basis of inherited property here:

    Publication 551 (12/2022), Basis of Assets | Internal Revenue Service (irs.gov)

    Additionally, the basis is increased by the cost of improvements to the property. The IRS lists the following items as improvements that would increase the basis of your property:

    • putting an addition on your home
    • replacing the entire roof
    • paving your driveway
    • installing cental air conditioning
    • rewiring your home

    You can find more information about improvements that increase the basis of your home here:

    Publication 551 (12/2022), Basis of Assets | Internal Revenue Service (irs.gov)