Do I have to pay taxes on a house I inherited?
My brother and I inherited a house from my Dad 18 years ago. We are finally selling it. Do we have to pay federal income tax on the proceeds. How about California tax (where the house is located or New Mexico tax (where I live)?
Best Answer
-
Hello,
It depends. You need to figure out what the basis is for your inherited house. Usually, it is the fair market value on the date of the previous owner's death. Once you have your basis, you then will subtract the sale from the basis. For example, say the home was worth 300,000 18 years ago. You are now selling it for 700,000. So the total taxable gain for you would be 400,000, not the full 700,000.
However, say that you sold it for $250,000 instead. This means you would have a $50,000 loss you can claim instead. So you wouldn't pay taxes on it, instead, it would reduce your overall taxable income/AGI.
Most states do tax capital gains, so if you have a taxable gain, you will need to pay taxes on it. States tax you by income received within the state and income you received while a resident of the state. So it is likely that you will be taxed by CA and NM for the home.
