Hi, it’s Nick with Sell my San Antonio House. Today I want to share information in case you have inheriting a home in San Antonio and you’re curious about what taxes are going to come along with that. To do this, we will focus on 5 questions that everyone who is going through your situation should consider when deciding what the future of the inherited property will be.
When you inherit a house, understanding the tax implications is crucial for several reasons. First and foremost, it empowers you to make well-informed financial decisions. By grasping how taxes will affect your personal finances, you can strategically plan for your financial future, avoiding unexpected tax liabilities or penalties due to non-compliance with tax obligations.
Moreover, a deep understanding of taxes when inheriting a house opens up opportunities to optimize your benefits. For instance, being aware of available tax exemptions or employing suitable tax planning strategies can lower your tax burden and safeguard more value from the inheritance.
Additionally, this knowledge equips you to make informed choices regarding the fate of the inherited property. Whether you decide to keep the property, sell it, or explore other options, understanding the tax implications helps align your decisions with your long-term financial and personal goals.
In essence, gaining insight into taxes when inheriting a house empowers you to take control of your financial situation. It enables strategic decision-making, maximizes your benefits, and fosters peace of mind and confidence in your financial choices.
1. Does This Property Qualify for the Home Sale Tax Exclusion?
Short answer, probably not. But first, you need to know what a Home Sale Tax Exclusion, it is when you sell your home, your primary residence, you can usually get an exclusion for the first $250,000, or $500,000 for a married couple, that you don’t have to pay taxes on.
The important point here is that for this exclusion to work, certain clauses must be met, among them that the house is your main residence, for which you must have been living for 2 years. Therefore, in most cases this clause does not apply, however the good news is that you probably will not need it, cause you will benefit from the stepped-up basis rules for inherited property.
2. Does This Qualify for a Stepped-up Basis?
Let’s start with what a stepped-up basis is.The actual definition is: a tax policy that looks at the market value of assets at the time a person inherits them instead of the value when the prior owner purchased the assets, and what in means is, When you inherit a property, your new basis is the value of the property at the time you inherited it so if you inherit it today and it’s worth $100,000, so the basis is $100,000. If you then sell it for $100,000, there’s no capital gain there. So there’s no gain that you’ll have to pay taxes on.
It doesn’t go back to the fact that you inherited it and you didn’t pay for it so you had to pay taxes on all $100,000. No, you get a stepped-up basis. So you start with the value of the property, the time you inherit it. You need to take in consideration that the adjustment can either be an increase—known as a step-up in basis—or a decrease in the basis, depending on the value at the date of death, usually you will be dealing with steps up.
3. What if I Sell it For Less Than The Value of The Property at the Time Inherited?
If I sell the property for less than its value at the time of inheritance, can I deduct that loss? In most cases, yes, you likely can. Selling the property as-is for less than its inherited value qualifies you for a deduction. This deduction allows you to offset the difference between the sale price and the value at inheritance, reducing your taxable gain.
There’s a limit on the annual deduction amount, but the good news is you can often spread this deduction over multiple years. For instance, you might deduct a portion of the loss this year and carry over the remainder to future years. This strategic approach helps manage your tax obligations efficiently and maximizes your tax benefits over time.
4. What Taxes Will I Pay?
So you’re probably still going to have to pay any property taxes. So those will be for the county that it’s in, possibly the city. And so the property taxes on that usually will be taken out. If you owe nothing, then it’s nothing. If you just owe that year’s amount up to the day you sell it, that money will be taken out at the time you sell it. But you can usually look up your property taxes. There’s probably a county website, you can see where it is. And if you want to figure out are any taxes owed or how much will it be at the time you sell it? That amount is probably going to come out.
5. How Can I Easily Sell This Property Quickly for Cash As Is?
Give us a call. We buy them all the time, especially in San Antonio area, other parts of Texas. But we buy a lot of them because a lot of people that have inherited property, “Hey, we just want to go ahead and sell this property. What can we do?” It’s fast. It’s easy. We make you a cash offer. If that’s something that we can help you with, or if you just want to ask a couple of questions, happy to help you out. Give us a call at (210) 201-6644 or reach out to the website sellmysanantoniohouse.com.
