No doubt, inheriting a house is a blessing. But it comes at the loss of a loved one. Moreover, dealing with inherited property is a big responsibility. While upkeep is something everyone can handle, tax implications are confusing for most. As a result, they make decisions that cause them more losses.
If you want to sell your house fast in Waterford, it is crucial to have sound tax knowledge. Let us dig into some essential tax questions.
- Is tax inclusion applicable to inherited property sales?
Usually, the tax law offers a tax exclusion of $250,000 on selling a home. This means you don’t need to pay taxes on profit gained from the first $250,000. Unfortunately, this does not apply to an inherited house. However, if you want to qualify for the tax exclusion, you must use it as your primary residence for a minimum of two years.
But thanks to the “stepped-up basis" rules, you do not need tax exclusion anymore. You will benefit from this in many ways.
- How do stepped-up basis rules benefit homeowners?
In ordinary cases, the property basis is nothing but its purchase price. When it comes to an inherited house, the “stepped-up basis” refers to the market value from the day of the owner’s death. This will always work in your favor, as the value number is higher. Thus, your taxable loss or gain will depend on the difference between the sale price and the stepped-up basis.
- Is it possible to deduct a capital loss from tax?
Yes, the deduction of a capital loss from taxes is possible, provided you sell an inherited house for less than its fair market value. This will greatly help in easing your tax burden. Keep in mind that you are eligible to deduct only $3,000 of losses per year. The remaining can be carried forward to the following years.
In closing
Hopefully, you know how to reduce your tax burden when selling an inherited house. Also, taking a traditional route to sell an inherited house is a real challenge. The best way is to sell directly to cash home buyers in Waterford, like Detroit Cash For Homes. We buy houses as-is without letting you coordinate showings, make repairs, or hire a real estate agent.
Do you want to sell a Waterford home fast? If so, then contact us today and discuss your property.
