I am having difficulties what I should enter these information , step up home price, Basis, etc. in TurboTax question in the home sales category. I would appreciate your guidance.
Nine states have community property laws. These states are Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, and Wisconsin.
From an income tax perspective, community property has a significant tax advantage i.e. upon the death of the first spouse, the entire property (regardless of legal ownership) gets step-up in basis to the value on date of death. In separate property states, only the part of the property which was owned by the deceased spouse gets step-up in basis.
assuming you are the surviving spouse
in non-community property states you enter as cost/tax basis the fair value of the deceased spouse's interest on the date of death + your cost/tax basis for your share up to that date + any the cost/tax basis for improvements you as owner make after that date
in community property states you use the full fair value on the date of death + the cost of subsequent improvements you as owner made.
if you are using the worksheet to compute basis, the simplest way is to enter the computed amount as the purchase price. The IRS never sees this worksheet.