I inherited a house from my Mom when she passed away in May 2016. I sold the property April of 2017.

[Lrak]

Selling price was $207,000. She had a reverse mortgage on it that was $170,000. After all, said and done with the title company, city school taxes, real estate commissions, etc. I wound up with only $2,951 in my pocket. How would I go filing this on my schedule D. Does the inheritance tax that I paid (Live in PA) get claimed anywhere? I do my own taxes since I own a home and have some company stock that I buy and sell, but I have never dealt with this before.

[CathiM · Accepted solution]

To calculate whether you have a gain or loss on the sale of the property, you have to find out the FMV of the house on the date of your mother's passing (or an alternative valuation date if the executor chose one). Add to this FMV any closing costs, selling costs, capital improvements, special assessments and deduct any casualty losses you took as a tax deduction. This will be your cost basis in the inherited house. (This is called a stepped up basis in the property.)  This is assuming you have not converted the property to a rental property.

Subtract your cost basis from the selling price to get your gain or loss on the sale of the property.  

You cannot claim inheritance taxes as a deduction. 

[Critter]

The mortgage payoff doesn't come into play anywhere in the calculations ...

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