How do I report a second home that was inherited with the closing cost?
My husband inherited his parents home along with his 6 other siblings on 9/14/2018. We sold the home on 12/13/24. We did not live in this home but two of the siblings did up until 2 years ago. I know there is capital gains tax we have to pay from this sale. We got a 1099S from the sale and a settlement statement showing all the closing cost we can subtract from the profits. My husband paid to have the house, shed and yard cleaned out and paid to move off the property a car and storage building before it was sold. The lawyer gave him a check for those expenses right off the top from the sale and then the remainder of the money was split 7 ways between all the children who inherited the property. All of this happened at the closing.
I need to put the sale in the program. I want to make sure the closing cost get included but I don’t know where I put everything in the program. I do know the value of the property at the time they inherited the property. How do I report this sale in Freetaxusa program? We did not get a 1099B.
I love this program and have been using it for many years ever since someone suggested it to me. I have been trying to figure this out and almost gave up and then I stumbled across this forum. You are my last hope with this. If I can’t figure this out, I will have to have someone else do our taxes this year. Thank you for your help!
Answers
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Hello Ctbeach7,
The first thing you will want to do is figure out the fair market value of the home at the time your husband and his siblings inherited it. Just to confirm, this was not a gift, right? It was an inheritance after his parents passed?
That usually will be your new cost basis for the home, not what the parents originally paid for it. Since this is split between the seven siblings, when you enter it into our software, you will only report your husband's share of the inheritance. For example, say the home sold for 700,000 and the new basis was 400,000. The total gains would be 300,000 at the point, which you would divide 7 ways. So you would say that he sold it for 100,000 in our software and the basis is 57,143 if it was divided evenly between the siblings.
As for the costs to clean the home and such, generally, those are not deductible. They would be considered personal expenses. If you had someone cleaning your own home, you wouldn’t get to deduct those costs. If you did some permanent repairs/improvements, like getting a new roof or carpet, that would be added to the total cost basis.
You may be able to include some of your closing costs expenses to your cost basis, which will reduce the taxable gain of the sale of the home. Publication 530, page 15, right side column, goes over the closing costs you are and are not allowed to claim:
To report this in our software, you would go to Income -> Investments and Savings. Add an investment and pick Other Sales as the investment type. Answer the following questions. You will then be asked about the home, like the date you got it, the date you sold it, sale proceeds, cost basis, etc.
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Your reply will be a big help! Thank you so much. The house was inherited and not a gift.
Thank you!Terry B
