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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29573
Experience:  Taxes, Immigration, Labor Relations
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What are the tax implications of selling my father's house

Customer Question

What are the tax implications of selling my father's house in NYC and how can I lower my liability?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

There are some issues to consider...
- if that house was inherited OR gifted to you? That is important to determine your basis...
- have you used the house as your primary residence? That is important to verify if you qualify for the exclusion?
- was the house used as a business or rental [property?
I will help you to determine expected tax liability.

Expert:  Lev replied 1 year ago.

The first step - to determine the basis...

If the property was inherited - the basis is the fair market value at the time the decedent passed away.
If the property was purchased - the basis is the purchase price.
The basis is adjusted by some items - for instance - improvements will increase the basis.
Then - we need to calculate the gain which is equals to (selling price) MINUS (adjusted basis) MINUS (selling expenses - Realtor fees, etc)

That gain is added to other taxable income - but generally is taxed at reduced rates assuming the property was owned more than a year. Long term capital gain rates are 15% for most taxpayers - but for high income - it might be 20% and for low income 5%.
If the property was used as a primary residence at least two years within last five years before the sale - - up to $250k (for a single seller) may be excluded from taxable income.

NY state income tax rates also depend on total income - between 4% and 8.82%
and finally NYC tax rates are between 2.907% and 3.876%.

Separately from income tax - there is NY transfer tax on real estate sales. Tax is computed at a rate of two dollars for each $500, or fractional part thereof, of consideration. An additional real estate transfer tax (sometimes referred to as the "mansion tax") of 1% of the sale price applies to residences where consideration is $1 million or more.

Let me know if you need help to estimate your expected tax liability.