If you are equal co-owners then each owner MUST report the sale of an asset with a sales price of $45,000 (1/5 of $225,000) and a cost basis of $13,600 (1/5 of $68,000) on their personal tax return. Each taxpayer must pay capital gains tax on their personal tax return.
Capital gains is taxed at a lower rate than regular income.
The Capital Gains Tax rate is 15% for almost everyone, even people who are in the 25%, 28%, or 33% bracket for regular income.
The capital gains tax rate is 20% only for people whose regular income is more than $415,000 (single) or more than $466,000 (married filing jointly).
There is an additional 3.8% investment tax (for Obamacare) on the amount of the investment only, for people whose total income is more than $200,000 (single) or more than $250,000 (married filing jointly).
So I think as a practical matter, you and your siblings are all likely to owe the same tax on the sale of the house, unless some of your siblings earn more than $250,000. You may be worrying for nothing.
If you happen to have a sibling who earns more than $466,000, then their tax on their share of the house would be $7473 instead of $4710. If that relative thinks that you should pay him part of the difference because it is unfair that he makes $466,000 and owes 23.8% while you making $50,000 only pay 15%, then it's not you splitting the family.
