I recently sold a home I had inherited. Is there anything I can do to lower my taxes owed at the end of the year?

[bduccinisf78]

sold home in California and want purchase a home in arkansas

[tagteam]

When you inherited the home, you received a basis stepped up to the fair market value of the home on the date of death of the decedent. 

Further, if you owned and used the home for the last two of five years leading up to the closing, you can take advantage of the Section 121 home sale exclusion.

See https://www.irs.gov/publications/p523#en_US_2023_publink10008996

[Opus 17]

Because of the stepped us basis, your capital gain is only the difference between the selling price and the fair market value on the day the previous owner died, not the entire selling proceeds.  There are a few closing costs you may also be able to subtract from your gain.  See IRS publication 523.

https://www.irs.gov/forms-pubs/about-publication-523

Also note, if you did not live in California, the sale will be considered California income, and you will need to file a non-resident return to report this income and pay state tax on it.  You also report the sale (along with all your other income) in your home state, but your home state will give you a credit for taxes you pay to another state so you aren't double-taxed on the same income.  

What you do next (like buying another house) has no effect on the taxability of the sale of the first house.