When a loved one passes, the process of inheriting a home can be confusing and stressful. you might be in for a long process of confusing legal terms and jumping hoops depending on the probate. Trying to deal with all of this while mourning a loved one’s loss is not easy. So what taxes must I pay when Inheriting a home?

Understanding all that you can before it happens is extremely important, which is why we wanted to provide you with a quick rundown in terms of what you can expect to pay in taxes when inheriting a home.

Inheritance Tax

When you inherit a property, you get slapped with taxes. That’s the unfortunate truth. Inheritance tax is a specific tax that gets calculated for each person separately who inherits physical assets or cash from an estate.

There is usually a minimum for the total inheritance value before you must pay taxes on it. The number is usually quite large, meaning you won’t have to pay anything if you don’t reach this cap.

For example, there are some state that might hit you with a 5% tax on any inheritance greater than $3 million. This means that if you inherit a home that is only $450,000, you will not have to pay any inheritance taxes.

The relationship you have to the recently deceased may also determine your tax obligations. Spouses, for example, are often exempt from inheritance tax. In many cases, dependents or children can also qualify for this exemption. On the other hand, if you inherit from someone with whom you have no familial connection, you will likely have to pay near the higher end of the tax rate.

Capital Gains Tax

Once you have paid the proper taxes (if necessary), to seal ownership of the home, you will have to make the decision of whether you want to sell it or not. If you decide to sell your inherited home, you may end up responsible for something called capital gains tax.

You get hit with capital gains tax every time you purchase a “capital asset” and sell it for a higher price than what you bought it for. Capital assets are stocks, bonds, coin collections, jewelry, or real estate.

Whenever you sell a property, you are responsible for the capital gains tax.

The tax that you must pay is based on how much you earn from the home. The good thing is that this tax is not derived from any increased value from the time the home was purchase to the time you sell it. Instead, the tax is derived from the time of the owner’s death to the time that you sell the home.

Preparing For More Than The Keys

Inheriting a home entails so much more than simply getting the keys. If you have any other questions about inheriting a home or selling your property, get in touch with us here at Tru Buyers. We can help you sell your home in as-is condition so that you can take the next steps in your life as quickly as possible.