What taxes will be owed if you keep or sell the house?
Once you have a clear picture of the house’s current standing, think through any taxes you’ll owe if you keep or sell the inherited property. For example, if you’re keeping the house, you’ll be responsible for the mortgage payments, potential HOA fees and yearly property taxes.
Normally, when you sell an investment property, you’re also responsible for paying a capital gains tax to the federal government on the profits you earned from the sale. This is essentially the difference between the amount you originally paid for the house and the new sale price.
The government, however, cuts people a break when the property is inherited. In that case, you pay what’s called “step-up taxes.” This amount is the difference between the property value of the house at the time you inherited it and the value at the time you sold it.
Let’s say the property is worth $450,000 on the day you inherit it. If you wait a few years to sell it, the value might increase to $500,000. You’d then be responsible for paying taxes on the $50,000 profit.
What’s the current condition of the house?
Sometimes, selling an inherited house is easier said than done. That’s especially true if the owners lived in the house for a long time and tended to hoard things. When you inherit the property, you may have to hire a professional organizer and cleaning service to get the home back into working order. This service can be extremely costly, running upward of $15,000 just to clean a mobile home. The bill just gets higher from there, depending on the size of the property and the amount of work to be done.
Additionally, you’ll want to find out if there are any major repairs that need to be made. These can also be costly, too, depending on the type of repair. For instance, you can expect to pay between $2,138 – $7,426 to repair the property’s foundation, according to HomeAdvisor.
If the house is older, but in good condition, you may just decide to make small updates like repainting the interior and exterior and buying current, matching appliances for the kitchen to make it more marketable at time of sale.
Do you want to live in the house?
If the house is fully paid off and your current house is not, it could be a great chance to sell your current home and keep the inherited one — free from a mortgage payment.
Additionally, if the inherited house becomes your full-time residence for two of the last five years, you might qualify for a tax break. When someone sells their primary residence, they may be able to exclude up to $250,000 of the capital gains from their taxes, which could potentially zero out the tax bill, reported MarketWatch.
Are there other stakeholders listed in the will?
It’s common for a parent or loved one to leave their property to multiple people in their will. This can sometimes make things difficult, especially if the children don’t agree on what should be done with the inherited property. If that’s the case, one of the siblings could decide to keep the inherited property and buy the other sibling out. Should both siblings be on the same page, you also have the option to sell and split the profits or rent and split the profits. Additionally, if you can’t arrive at a consensus, you might opt to get the courts involved by filing a lawsuit for partition. That essentially entails asking the judge to order the sale of the property. This should definitely be your last resort, after all other efforts to come to an amicable resolution have failed.
Are you focused on selling an inherited house quickly?
Losing someone you love is already extremely painful. Maintaining the house they used to live in can sometimes add to that emotional toll. Additionally, you may not be on good terms with some of the other key stakeholders and don’t want to be tied to them financially.
You may want to sell it quickly for tax reasons, so you’re not responsible for paying additional taxes on the increased value of the property at the time of sale.
Fortunately, Meridian Trust makes it fast, easy and safe to sell inherited property. A home investment company, we pay cash for inherited homes, townhomes, condos, apartments, and multi-family units in Florida, Georgia and Texas. Selling an inherited house can be done in three simple steps — and you can get paid as quickly as 10 to 14 days after we receive your signed contract.
To find out how much you might get paid to sell inherited property, give us a call at (954) 807-9087.
Note: This guide is for informational purposes only. Meridian Trust does not make any guarantees about the sufficiency of the content in or linked to from this blog post or that it is compliant with current law. The content within this blog post is not a substitute for legal advice or legal services. You should not rely on this information for any purpose without consulting a licensed lawyer in your area.