What Are the Tax Consequences When Selling a House Inherited in Jacksonville?

What Are the Tax Consequences When Selling a House Inherited in Jacksonville_The tax consequences when selling a house inherited in Jacksonville can be hard to understand and untangle much of the time.

The relevant laws may seem fairly simple at first glance, but they get complicated when you factor in all the legal conditions and nuances. The short version is that if you made gains, you’ll owe taxes, and if you had a loss, you may have a tax deduction.

But then it gets complicated because whether you made a profit or had a loss also depends on when the decedent died and the use you made of the house.

What Are the Tax Consequences When Selling a House Inherited in Jacksonville?

Capital Gains or Losses Taxes

Your tax consequences when selling a house inherited in Jacksonville include being subject to capital gains taxes. Capital gains or losses are those that stem from the sale of items you use for personal or investment purposes, such as stocks and houses. However, since this is your own property and not an asset which was bought with someone else’s money, it can be considered long-term gain (or loss). As stated earlier: “losses on personal property cannot be claimed as a tax deduction.”

Reporting the Inherited House

In some cases, the executor has to file an estate tax return to report the inherited house. But this is only if the estate exceeds a threshold amount that changes every year depending on inflation and not just on how expensive your parents were when they died! The basis of your deceased relatives’ home could be very different than yours, which may have implications for taxes after their death.

“Basis” Determination

The basis of the house depends largely on when it was inherited. In general, the basis is the fair market value on the date of the decedent’s death. What this means is that the capital gains taxes you owe are based on gains above the property value at the time of the decedent’s death – not what the decedent paid for the house.

If you never lived in the house and if it sells for less than what the fair market value was at the time of death, then you have a deductible loss. Just be aware that only $3,000 of such losses can be deducted each year against your ordinary income. Anything above that $3,000 will have to be carried over as deductions in future years.

Reporting Sale of the Inherited House

Obviously, when you sell an inherited house, you have to report the sale (and gains or losses) when you file your income tax return. To calculate the gain or loss, you have to subtract the basis from what you received for the sale.

To report the gain or loss, you need to use the standard document for this purpose, the IRS Schedule D. You also have to include the gain or loss on your personal Form 1040 tax return. And make sure you use the Form 1040 (and not the Form 1040A or Form 1040EZ) for the year in which you sold the inherited house.

The tax consequences when selling a house inherited in Jacksonville can be complex and difficult to understand at best.It’s usually a good idea to find a professional to help you navigate the tax waters.

We’re ready to help you reach your real estate goals and will be glad to answer any and all questions. Contact us by phone at (904) 508-0207 or fill out the online form.

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