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How do i claim a house sold on taxes that was inherited? And is this something i pay taxes on or not?

My husband inherited a home from his mother which we sold this year. We’re not sure how to claim this as we didn’t have a “price we paid” for the home: we do have the appraisal before it transferred into his name for sale. I’m not sure if that helps.
1 Reply
DS30
New Member

How do i claim a house sold on taxes that was inherited? And is this something i pay taxes on or not?

It depends -

If no one used the home for personal use before the sale, enter this as an investment home sale on your return. You would only have to pay any income taxes on a capital gain from the date your inherited the property until the date of sale. You can use the appraised value if it was made around the time of inheritance as the cost basis in the house.

Also - Inherited property always qualifies for long-term capital gains treatment (even held for less than a year).

To enter this transaction in TurboTax, log into your tax return  (for TurboTax Online sign-in, click Here  and click on "Take me to my return") and type "investment income (gains and losses)" in the search bar then select "jump to investment income (gains and losses)". TurboTax will guide you in entering this information

  1. The first screen will ask if you sold any investments during the current tax year (This includes any sale of real property held as an investment property so answer “yes” to this question)
  2. Since you did not receive a 1099-B, answer “no” to the 1099-B question
  3. Choose type of investment you sold - select everything else
  4. Some basic information:
    1. Description –  Usually the address of the property sold
    2. Sales Proceeds – net proceeds from the sale
    3. Date Sold – Date you sold the property (on 1099-S)
  5. Tell us how you acquired the property - inheritance
  6. Enter the date inherited
  7. Enter the your fair market value - The Fair Market Value of the property at the time of inheritance plus any capital improvements since inheriting it 
  8. If you had a loss, on the question of "Did you use this property for business or investment?" If the inherited house was not used for any personal use (no family member lived in it or used it between the time of inheritance and the sale), you will answer that this was for investment

Click IRS answers on Gifts and Inheritance for more information from the IRS on the sale of an inherited property.


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