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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28081
Experience:  Taxes, Immigration, Labor Relations
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My mother in law recently passed away leaving us her home,

Resolved Question:

My mother in law recently passed away leaving us her home, and she lived in New Jersey as do we and his sister who also the house is being left to. We will be selling her home and it is worth about 200000, she paid 125000 20 years ago. My question is do we have to pay taxes on the sale of her home. Someone said it will be about 25%.
Submitted: 7 years ago.
Category: Tax
Expert:  Lev replied 7 years ago.

Inherited property has stepped-up basis - that is a fair market value of the property at the time the decedent died - so if the fair market value is $200,000 - that would be the basis.

Assuming - you will spend $10,000 for renovations - that will bring the basis to $210,000

If you sell the property - let's say for $225,000 - the capital gain will be calculated as $225,000 - $210,000 = $15,000 - and it will be taxable as long term capital gain - at reduced rate - not more than 15%

Additional NJ income taxes will be due on that amount.

Please be aware that all numbers above are very raw estimations and are for illustrations only.

Let me know if you need any clarifications.

Customer: replied 7 years ago.
So we would just have to pay tax on anything above fair market value?
Expert:  Lev replied 7 years ago.

Yes - any gain is calculated as a difference between the sale price and the basis.


If you do not do any improvements - and sell shortly after the decedent died - the selling price will be considered as a fair market value and as the basis of the property -so there will not be any capital gain.


If you do improvements - the fair market value will likely increase, but the basis will be a fair market value at the time of death (not selling price) plus improvement expenses.


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