How much tax will we owe on this inherited home’s sale?


Q. I am the executor on my mother’s estate. The house was sold for $385,000 and it was only in my mom’s name after my father died. If I take off the $250,000 deduction, does that mean my siblings and I will owe capital gains on the $135,000? I will need to know this before sending out any checks to my siblings.
— Heir

A. We’re sorry to hear about your parents.

You’re correct that when a person sells their primary residence, they are entitled to a $250,00 capital gains exclusion if single, or a $500,00 exclusion if married.

However, different rules apply when a person inherits real property, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

“When Dad died, the cost basis in his share of the house was stepped up to the value of his share of the house as of the date of death,” Whitenack said. “When Mom died, there was another step up in basis to the value of the house at the date of her death.”

Therefore, if the house was valued at $385,000 at the date of your mother’s death, there would be no capital gains tax to the beneficiaries, Whitenack said.

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This story was originally published on Jan. 1, 2021. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.