Tax question: Selling a house

[alnorth]

Originally Posted by Brock

The way I understand it, no matter if you just inherited it, the government treats it like long term capital gain. My recommendation? Keep it and rent it out. It's income, and more importantly, business expenses give you the opportunity to **** the government for a change.

Well, I do know that is wrong. Assuming complications like trusts arent involved, if you straight-up inherit a piece of property, stock, almost anything out of probate court, you get a step-up in tax basis. (some exceptions, inherited non-Roth IRA's are still taxable because the contributions were never taxed, and I'm pretty sure inherited annuities are taxed)

In other words, the government treats it as if you "bought" it on the day of death, so future gains are taxed, but the prior gains died with the previous owner and the taxes owed on that if the previous owner would have sold are forever lost to the government.

You dont normally have to worry about estate taxes on inheritances until you get over $3.5M total net worth, or less if the guy who died made lots of huge gifts during his life. (There is a $3.5M exemption to the estate tax, which is cumulatively reduced each year by any gifts made and reported to the IRS over $13,000/year/person)