Received our beneficiary's portion of parent's home in 2023

skeeter Member Posts: 1 Newcomer

My MIL's home was sold during 2023 with my husband receiving his half of the proceeds. She passed a few years ago, so there was a difference in the home's value at the time of her passing and what it was sold for last year. We received a K-1 form, which I entered into our 1040 info here on FreeTax. As a result, what we owe to the IRS is over $20,000. Is this to be expected? We are in California as well as the home sold. Is there other forms we should have? Should we seek a tax professional to do our taxes instead? We are both retired so this tax owed is a surprise to us. Thanks for any direction you can give.


  • Henry
    Henry FreeTaxUSA Agent Posts: 86
    edited February 27

    Hello skeeter, I can understand your concern if your tax bill is larger than expected.

    Usually when you inherit a home, your cost basis in the home is the fair market value of the home on the date of your MIL's passing. When you sell the home, your taxable gain is the difference between your cost basis and the sales price. If the home went up in value significantly between the time that you inherited it and the time that it was sold, then it is possible for that transaction to have a big impact on your taxes.

    Keep in mind that if you and another person inherited the home together, you should only account for your half of the basis and sales proceeds when calculating your portion of the gain from the sale.

    As long as the correct information has been reported on the K-1 that you received, it should be pretty easy to account for the gain on your tax return. You may want to reach out to whoever issued you the K-1 to make sure the gain has been reported correctly.

    If you have further questions about the tax calculations on your return, please contact Customer Support from within your account and they would be happy to review that with you.