Capital gains Ohio
I live in Ohio and sold inherited property that I have had for 12 years. I made improvements and sold it for much more than the price it was valued at. I tore down an old house and sold just cleared land. Will I have to pay capital gains tax? If so, how can I reduce the taxes owed?
Answers
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You will likely have to pay capital gains tax on the sale. The IRS does use a step up basic, which allows you to take the fair market value of the property on the date of the decedent's death rather than when they bought it. Having this adjusted basis should help reduce the taxes owed. Additionally, including expenses to the cost basis will also decrease the taxes owed. Expenses include, real estate commissions, transfer tax, legal fees, advertising, home inspection reports, improvements, closing costs.
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The estate valued it low. Do I have to use the number they valued it at?
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When you said that the estate valued it low, you need to determine how the value was calculated and demonstrate that you have a more realistic value. Given the time lapse that could prove challenging but you could look as sales of similar properties in the area at the time. It may be worth asking real estate professionals who have worked in the area.
You pointed out that you've made significant improvements. The costs of those improvements, including the demolition, can all be added to the basis which would reduce your gain. That's in addition to the inspection fees and legal costs listed by Lauren in the previous reply.
