Death of my brother

[bayray31]

My brother died without a will. I am the only relative. I sold his house and all of his belongings. He was a disabled veteran. Will I need to file a tax return for him? The house sold for less than 150k more than the purchase price. His only income was VA disability and Social security.

[EleanoreS]

@bayray31 Good afternoon.  I am sorry for your loss of your brother.  If his taxable income is below the 2022 filing threshold of $12,950 for a single taxpayer under age 65 who is not blind, a return does not have to be filed. If your brother was over age 65 or blind, the filing threshold would be higher. TurboTax has a great article with more information about filing requirements .

As to the house.  The purchase price does not come into consideration.  The house receives an increased; "stepped-up" basis to the value on the date of death.  In most cases; when the house is sold in a short time after death the gain is very small if any at all.  

This TurboTax Article about the death of a family member  will provide a lot of useful information.

[mfields2]

In general, your filing requirement is based on your amount of taxable income.  While VA disability is generally tax free (see the following link here: https://benefits.va.gov/BENEFITS/factsheets/serviceconnected/Compensation.pdf), and social security is also tax-free if there is no other source of taxable income, you may still want to file a final tax return.  This would provide the social security administration and IRS with final notice of his death (the social security administration should know already, as they have stopped his social security payments).  

The more difficult task may be to electronically file a return with no taxable income, as TurboTax will not e-file a return with no taxable income (you can always file by mail).  To get around this limitation, you can put $1 of income from a bank account as investment income, which will allow the return to be e-filed.  You can find this in the "Wages and Income" section under "Investment income."

And the home should pass to you tax free - the capital gains on the home are erased at death (this is called the "step up" in basis).  It is not reported on a final income tax return unless he sold it before he died.  For you, as the inheritor of the house, you may have a capital loss on the property sale, if you incurred expenses to sell it (broker fees, closing costs, etc.) and you did not live there (i.e. - use the property as a personal use asset).  It would be reported as a capital loss on your tax return.