topic Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents passed away. We sold the house. How do I report it? What can be deducted? in Deductions & credits

Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents passed away. We sold the house. How do I report it? What can be deducted?

joenewcomer-veri — Mon, 09 Mar 2026 06:04:52 GMT

Re: Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents pass...

LeonardS — Tue, 15 Feb 2022 23:15:04 GMT

Your wife will split all items equally with her brother when reporting the sale.

The cost basis of the home will be its fair market value at the time of your parent's passing.

Generally, these expenses can be deducted as selling expenses:

Appraisal fees.
Inspections.
Loan origination fees.
Title fees.
Transfer fees.
Mortgage interest.
Mortgage points.
Real estate property taxes.

To report the sale of the house in TurboTax follow these steps:

Open or continue your return
In the search box, search for sold second home and select the Jump to link
Answer Yes on the Did you sell any stocks, mutual funds, bonds, or other investments in 2021? screen
- If you land on the Your investment sales summary screen, select Add More Sales
On the OK, let's start with one investment type screen, select Other, then Continue
On the Tell us more about this sale screen, enter the name of the person or institution that brokered the sale
On the next screen, select Second Home (choose this also for inherited homes) or Land and answer the questions to finish entering your sale

This link Where do I enter the sale of a second home, an inherited home, or land on my 2021 taxes? has information you may find useful.

Re: Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents pass...

joenewcomer-veri — Wed, 16 Feb 2022 23:26:53 GMT

What if there was a life estate?

Does that change things?

Can they deduct repairs, maintenance during the life estate to reduce the stepped up baseis?

Re: Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents pass...

KrisD15 — Thu, 17 Feb 2022 01:13:33 GMT

No, until they own it, they can't deduct expenses.

"Stepped-Up Basis" is not a bad thing. The higher the basis when you get something, the less capital gain you need to report when you sell it.

An inheritance does not trigger federal tax, only when you sell the item you inherited might there be tax.

Example:

If your parents bought a house for 100,000 and it's worth 200,000 when they pass, the "Stepped-up basis" would be 200,000.

If you sell it a year later for 225,000, you have 25,000 capital gains, rather than 125,000 capital gains if you had paid for it originally.

We deal with Federal Law here. Real Estate is governed by the State. You really need to speak with a local real estate attorney to make sure the title was held in a way that the house was inherited (it sounds like it was) before making any assumptions.

Re: Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents pass...

joenewcomer-veri — Thu, 17 Feb 2022 02:14:39 GMT

That was not the question. The parents DEEDED the house to them. Not in a will or estate. So the value was the original sales price, correct?

then can they deduct any improvements from the date the house was deeded?

Re: Home Deeded to my wife and her brother about 10 years ago, with life estate. The parents pass...

KrisD15 — Thu, 17 Feb 2022 02:29:27 GMT

Check with an attorney.

A life estate usually means the ownership does not transfer until death.

"A life estate is created by a deed that gives the land to the person "for life" and identifies what should happen to it after that person dies."

Cornell Law

"A life estate deed permits the property owner to have full use of their property until their death, at which point the ownership of the property is automatically transferred to the beneficiary."

Rocket Mortgage

"If there is a life estate, the life tenant's interest in the property ends at death, and ownership is transferred to the remainderman. The life tenant is the owner of the property for life and is responsible for costs such as property taxes, insurance, and maintenance. Additionally, the life tenant also retains any tax benefits of homeownership."

Investopedia link