Have Tax Questions? Ask a Tax Expert for Answers ASAP
Hello JA Customer,
What year did your father pass away and leave you this home?
What was the property worth at the time of your father's death?
Hello again JA Customer,
Thank you for the additional information.
When you inherited this property from your father, the beneficiaries were entitled to a full stepped up basis in the property. That means your basis became whatever the fair market value was of the property on the day your father passed away. If the property was worth the same amount at that time as what you will now sell it for, then you have no gain and will owe no taxes on this sale.
You would only owe tax if you had a gain from the sale where you sold the house for more than your stepped up basis.
I am not sure what you mean by "tax changes at the end of the year".
Thank you JA Customer
I wanted to know app. how much estate and inhertance tax will have to pay. I keep hearing that at the end of the year the taxes are changing and will have to pay alot more if the house is sold after 12/31/10
First, there is no "inheritance" tax at the federal level. Instead, the IRS imposes estate tax based on the value of the entire estate. If your father died in the year 2008, then if his total estate was valued at $2 million or less, no estate taxes would have been due.
There are many tax law changes which will be effective next year. Most likely the one you have heard about which could affect you is the increase in the capital gains tax rate. That rate will be changing from 15% to 20%. However, in your particular case, you would not owe any capital gains tax if you have no gain from the sale.
As explained in my first post, when your father passed away you and the other heirs were entitled to a stepped up basis in the home. If the home was worth $450,000 when your father died, then $450,000 is your basis. When you sell the home you would calculate your gain (if any) by taking the sale price, less that basis, less the cost of any real estate commissions. If you sell the home for $450,000 and your basis is $450,000, then you have no gain and owe no taxes. You would only owe tax if you sold the home for more than what it was worth on the day your father passed away.