Mom passed 4 years ago and I inherited property.looking to sell house is in NY and I ive in NJ. i know I will I pay capital gains for state and fed? what percent?

[mjmj2727]

step up tax?
is there an inheritance tax in New york?

[DanPaul02]

 Your capital gains tax rate can be 0%, 15% or 20% depending on your income and your tax filing status.

To calculate capital gains tax liability, you begin with the tax basis (sometimes called cost basis) of the inherited property. This is the original purchase price of an asset, plus any improvements. Fortunately, when you inherit property, this amount is “stepped up.” That means the tax basis is bumped up to its fair market value as of the property owner’s death.

It is better to wait one year before selling the inherited property.  After one year, it becomes long-term capital gains which are taxed at a lower rate than short-term capital gains.  You are beyond one year so here is a table to help determine what rate you will pay.

Tax Rates for Long-Term Capital Gains 2020

Filing Status	0% rate	15% rate	20% rate
Single	Up to $40,000	$40,000 to to $441,450	Over $441,450
Head of household	Up to $53,600	$53,600 to $469,050	Over $469,050
Married filing jointly	Up to $80,000	$80,000 to $496,600	Over $496,600
Married filing separately	Up to $40,000	$40,000 to $248,300	Over $248,300

[Opus 17]

@DanPaul02  inherited property is automatically long-term as long as the prior owner had held it for at least one year. 

[Anonymous_]

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@DanPaul02 wrote:

It is better to wait one year before selling the inherited property.  After one year, it becomes long-term capital gains which are taxed at a lower rate than short-term capital gains. 

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The holding period of inherited property (property acquired from a decedent) is long-term regardless of how long the property is actually held.

See I.R.C. §1223(9)

[Opus 17]

First, yes, you inherit a stepped up basis. Your cost basis is the fair market value on the day your mother died. You may need to document this by getting a real estate appraisal, an appraiser can usually do a backdated appraisal based on historical records.

Second, the federal long-term capital gains rate is 15% for most people. New York State and New Jersey do not have special capital gains tax rates, you will be taxed on the gain at the same rate as ordinary income. New York’s income tax rate for most taxpayers is 6.8%, I don’t know New Jersey’s tax rate right now.

Third, if you are a New Jersey resident, you will first prepare a New York nonresident tax return which reports only your New York source income. That would be the sale of the house.  Then you will prepare a New Jersey state tax return that reports all your worldwide income and calculates the New Jersey tax on that income. You will get a tax credit in New Jersey for the income tax you paid in New York on the capital gain. In TurboTax, you must prepare the out-of-state tax return first so this credit correctly flows to your residence state tax return.

[Anonymous_]

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@mjmj2727 wrote:
is there an inheritance tax in New york?

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New York has an estate tax but not an inheritance tax.

New Jersey, however, does have an inheritance tax.

See https://www.state.nj.us/treasury/taxation/inheritance-estate/filingrequirements-inheritance.shtml

[note that New Jersey's estate tax has been phased out but still applies to decedents who died on or after January 1, 2017, but before January 1, 2018]

[Opus 17]

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@Anonymous_ wrote:

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@mjmj2727 wrote:
is there an inheritance tax in New york?

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New York has an estate tax but not an inheritance tax.

New Jersey, however, does have an inheritance tax.

See https://www.state.nj.us/treasury/taxation/inheritance-estate/filingrequirements-inheritance.shtml

[note that New Jersey's estate tax has been phased out but still applies to decedents who died on or after January 1, 2017, but before January 1, 2018]

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In NY, an estate tax is due if the estate is worth more than $5.9 million.  Also note, if an estate tax return was due to NY, it was due the year your mother died, not the year you sell the home. 

NJ imposes both an inheritance tax (on the transfer of assets) and an estate tax (on the value of the estate), but only on the estates of New Jersey residents.  If the decedent is not a resident of New Jersey, then NJ does not impose tax, even if the heirs are NJ residents.  

However, if your mom was a resident of New Jersey who happened to own property out of state, then you would be subject to both the transfer tax and the estate tax, because even though the estate tax was phased out in 2018, it sounds like your mother died in 2017(?).  And again, the transfer tax and estate tax, if owed, were due the year she died.