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At the moment you inherit, the IRS will consider the house’s original cost basis stepped up to current market value. This means that if you sell it immediately, you will pay no capital gains taxes:
Specifically, you'll need to know the property's fair market value (FMV) to calculate your cost basis for tax purposes. How do you determine the fair market value of inherited property? There are ...
These capital gains taxes are then calculated using what’s known as a stepped-up cost basis. … Continue reading → The post Capital Gains on Inherited Property appeared first on SmartAsset Blog.
Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation. When a property is sold, the taxpayer pays/(saves) taxes on a capital gain /(loss) that equals the amount realized on the sale minus the sold property's basis.
A stepped-up basis can be higher than the before-death cost basis, which is the benefactor's purchase price for the asset, adjusted for improvements or losses. Because taxable capital-gain income is the selling price minus the basis, a high stepped-up basis can greatly reduce the beneficiary's taxable capital-gain income if the beneficiary ...
Inheriting a home or other property can increase the value of your estate but it can also result in tax consequences. If the property you inherit has appreciated in value since the original owner ...
Tax basis of property received by a U.S. person by gift is the donor's tax basis of the property. If the fair market value of the property exceeded this tax basis and the donor paid gift tax, the tax basis is increased by the gift tax. This adjustment applies only if the recipient sells the property at a gain. [7]
The cost basis of an asset is important to you for two primary reasons – tax planning and investment planning. These two reasons are related because only with the proper investment planning can ...