My dad passed away this year and I inherited his house. We are in the process of selling it and we know we will be taxed for it since I haven't lived in that house in many years. How much can I expect to be taxed? How do I go about paying those taxes? Is there anything I can do to minimize those taxes?
Hello badams2011, I hope your day is going well.
When you inherit property, you receive what is called "stepped up basis". This means your cost basis (what you paid for the home) is the fair market value of the home on the date of death. I advise to get an appraisal of home as soon as you can. The longer we wait to figure stepped up basis, the harder to get the information. You will only pay taxes on the appreciation (growth in value) of the home from the date of death.
https://turbotax.intuit.com/tax-tips/family/death-in-the-family/L5albFXM4
When home is sold, if you do have a gain, you can pay estimated taxes on the gain to the IRS. Or you can pay when you file your tax return. I advise to make estimated payments if you can, this will help avoid any late pay penalty or interest for paying late.
https://www.irs.gov/payments/direct-pay
Turbo tax offers a tax calculator you can use to estimate your tax liability.
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
Hello badams2011, I hope your day is going well.
When you inherit property, you receive what is called "stepped up basis". This means your cost basis (what you paid for the home) is the fair market value of the home on the date of death. I advise to get an appraisal of home as soon as you can. The longer we wait to figure stepped up basis, the harder to get the information. You will only pay taxes on the appreciation (growth in value) of the home from the date of death.
https://turbotax.intuit.com/tax-tips/family/death-in-the-family/L5albFXM4
When home is sold, if you do have a gain, you can pay estimated taxes on the gain to the IRS. Or you can pay when you file your tax return. I advise to make estimated payments if you can, this will help avoid any late pay penalty or interest for paying late.
https://www.irs.gov/payments/direct-pay
Turbo tax offers a tax calculator you can use to estimate your tax liability.
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/
The total amount of taxes paid will be determined by how long you hold the property, your filing status, and total taxable income for the year. If property is held for more than 1 year (long-term), the gain will be subject to capital gains tax rates, which can range from 0% to 20% based on your income (a few exceptions apply where capital gains may be taxed up to 28%). If held less than 1 year (short-term), the gain is added to income and taxed the same as any other income.