31 Oct We sold an inherited home. Is capital gains tax due?

Q. My mother died and left her home to me and my sister. I lived in the home for two years before we sold it. We never changed the deed to show we owned it, so how are we supposed to figure out if a capital gains tax is due?
— Heir

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

Here’s what to expect on the tax front.

When your mother died, her home received a step-up in its basis, which means its basis became equal to the fair market value at the time of her death, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

She said if you and your sister sold it at that time, after taking into consideration selling expenses, there probably would have been no capital gain.

It is likely that the house has appreciated in the last two years, Romania said.

“You could obtain the assistance of a qualified appraiser to give you the value of the house as of your mother’s date of death and currently; a realtor may likewise be able to assist,” she said. “Sometimes using the real estate tax assessed value and the town’s true to assessed value ratio can give you a determination as to market value.”

You should also look at IRS Publication 523, Selling Your Home, she said.

“It will give you more information on your ability to take the $250,000 exclusion for home ownership and use of a home as a principal residence for at least two years during the five-year period ending on the date of the sale, as well as expenses which you can deduct in determining gain,” she said.

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This story was originally published on Oct. 31, 2023.

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