nheriting a home is often a bittersweet experience. On one hand, you’ve received a valuable asset that could potentially improve your financial situation. On the other hand, you’re also grieving the loss of a loved one, which can make managing the details of property ownership feel overwhelming. If you’ve recently inherited a home and are unsure what to do next, understanding the tax consequences when selling an inherited property is crucial in helping you make an informed decision. Fortunately, tax laws are designed to ease the financial burden on those who inherit property, making the process less daunting than it might initially seem.
At iBuyLehigh, we work with individuals and families throughout the Lehigh Valley, including Allentown, Bethlehem, Easton, and the surrounding areas, who are navigating the complexities of inherited properties. If you’re considering selling an inherited house, here’s what you need to know about the tax implications and how they’ll affect your sale.
Tax Consequences when selling a house I inherited in Lehigh Valley, PA, PA
Calculation of Basis
Before you can understand the tax consequences of selling an inherited property, it’s important to know how the “basis” is calculated. Basis refers to the value used to determine capital gains or losses for tax purposes. When someone inherits a property, the basis is “stepped up” to the fair market value of the home at the time of the previous owner’s death.
For example, if your loved one purchased the home 20 years ago for $25,000, but the home is worth $100,000 at the time of their death, the stepped-up basis would be $100,000. This means that if you sell the home for $120,000, your taxable capital gain would be $20,000, which is the difference between the stepped-up basis and the selling price.
This adjustment to the property’s value helps reduce the capital gains tax owed, which is good news for anyone selling an inherited property.
Taxation of Gains and Losses
When you sell an inherited property, any profit or loss from the sale is considered a capital gain or loss for tax purposes. Capital gains apply to the sale of property, including homes, that are used for personal or investment purposes. If you decide to sell the inherited home in Lehigh Valley, PA, the IRS considers it a capital gain or loss based on the sale price compared to the stepped-up basis.
The good news is that even if you don’t hold the property for long, the IRS typically treats any capital gain or loss from the sale of an inherited property as a long-term gain. This is important because long-term capital gains are taxed at a lower rate than short-term gains, potentially saving you money. However, the specific amount of tax you’ll owe depends on various factors, such as your income level and the current tax rate for long-term capital gains.
Reporting the Sale
Once you’ve sold the inherited property, you’ll need to report the sale on your income tax return. To do this, you’ll need to calculate your capital gain or loss by subtracting the stepped-up basis from the sale price. You’ll then report the resulting figure on your tax return as either a capital gain or loss.
If the sale results in a loss, you may be able to use that loss to offset other taxable gains, which can reduce your overall tax burden. It’s important to keep detailed records of the sale, including documentation of the property’s value at the time of the previous owner’s death and the final sale price.
Navigating the Probate Process
Before selling an inherited home, it’s essential to go through the probate process, which legally transfers ownership of the property from the deceased to the heirs. In Lehigh Valley, PA, the probate court will authorize the sale of the home once all legal steps have been completed. If there are multiple heirs, everyone will need to agree on the sale before you can proceed. This step is critical, as any disagreements among heirs can delay the process.
Once you have approval from the probate court, you can move forward with selling the property.
Why Selling to iBuyLehigh is a Smart Choice
If you’ve inherited a home in Lehigh Valley, PA and are considering selling it, you might be concerned about the time, effort, and financial responsibilities involved. Fortunately, selling to a local cash buyer like iBuyLehigh can simplify the process. We specialize in helping families in Allentown, Bethlehem, Easton, and across the Lehigh Valley sell their inherited homes quickly and with minimal stress.
At iBuyLehigh, we know the local market and can provide a fair cash offer for your property, helping you avoid the long and often complicated process of listing the home traditionally. Whether the property needs extensive repairs or is in foreclosure, we can work with you to close the sale in a matter of days or weeks, allowing you to move on with peace of mind.
Selling an inherited house not only relieves you of the burden of maintaining the property, but it also simplifies the financial aspect of inheritance. If you’d like to learn more about the tax consequences of selling an inherited property in Lehigh Valley, PA, or if you’re ready to discuss selling your home, call iBuyLehigh at (484) 549-0019 or send us a message. We’re here to help you through every step of the process.
Selling to an investor like iBuyLehigh is a fast, straightforward way to deal with an inherited property, and we’re happy to answer any questions you may have about the process. Contact us today!