It can be bittersweet when you inherit a house – you’re receiving property that almost certainly has some value in it, while having to mourn the loss of a loved one. The last thing you want to be worried about are the tax consequences of the inherited property in Seattle WA. Rest assured, the tax laws are actually written in such a way as to avoid any further burden on you as you take possession of the property. This is good news – read on to find out more…
Tax Consequences When Selling an Inherited House in Seattle, WA
Calculation of basis
The first step in figuring out the tax implications is to ascertain the basis of the home—this refers to the asset’s cost for purposes of figuring the capital gains, along with some other taxes. You may be surprised to know that when a person dies, the property’s basis in Seattle rises to the market value at the time of their death (a concept formally known as “stepped-up basis”). For example, if a person purchased a home 25 years ago for $30,000 but it was worth $105,000 at the time of their death, that property would be valued at the latter amount for the purpose of calculating capital gains.
Taxation of gains/losses
The capital gains (or losses) tax covers what you get after selling the property, used for either personal or investment purposes. When you sell an inherited home in Seattle, the sale would be classified as either a capital gain or loss, depending on the outcome. Usually, you won’t qualify for a long-term capital gains tax rate unless you held the property for a year or more; however, with a inherited property, you get the long-term treatment no mater how long you were in possession of it.
Reporting the sale
Once you’ve sold, you’ll need to report that for purposes of your income tax. First calculate the capital gain using the basis as the starting point; then take that amount and report it in your tax return accordingly.
Of course, this process is not without some degree of stress, given the need to take care of the property and also worry about any tax implications. You’ll end up going through hat’s called a probate process in Seattle as the first step; the court would then authorize you to proceed to sell the home. Keep in mind that other beneficiaries would have to agree to this approach. Lastly, you would file a petition with the court to sell the home.
Next step is to consider how much tax you’re going to pay. You’ll pay it against the capital gain or loss resulting from the home sale. You can reach out to Northwest Property Solutions at (253) 220-7775 to help facilitate the sale of your home, anytime. We are local to the Seattle WA market and we know it better than anyone else! If this article didn’t clear up your specific situation with regard to taxes, give us a ring and we’d be happy to answer your questions.
Once you’ve sold an inherited property, it’s a load off your back – on top of that, selling to an investor in Seattle can make it an easy, smooth process. Contact us right away for step-by-step assistance on how to move forward with the process – we’re happy to help!