Did you know that American retirees expect to leave an average inheritance of around $177,000 to their heirs? If you’re a recent heir, you might have inherited something more than money.
When someone passes on, they often leave their home to a loved one. If you’ve inherited a home, you might be wondering what you should do with it.
Read on to learn what to do after inheriting real estate.
Taxes on Inherited Property
The first thing many want to know after inheriting real estate is how taxes work. The taxes you should know about include the following:
- State and federal estate tax
- State inheritance tax
- Property tax
- Capital gains tax
State and federal estate taxes are paid from the deceased’s remaining estate so heirs don’t have to worry about it.
State inheritance tax depends on the state you live in among other factors. If your state requires that you pay this, you’ll be taxed on the net worth of your inheritance. Currently, these are some states with state inheritance tax:
- Iowa
- Kentucky
- Maryland
- Nebraska
- New Jersey
- Pennsylvania
You’ll pay property taxes on any real estate that you own. Once the original homeowner passes on, the market value of your real estate inheritance will be reassessed.
Selling inherited real estate might require you to pay capital gains tax on the amount you make from the sale. The government will apply this tax on the financial difference between the amount you sell for and the appraised worth.
The most important thing to keep in mind is that taxes on inherited property depend on where your property lies.
Selling an Inherited Property
The basis of inherited real estate is that there are many reasons to put up the home for sale. Selling the property is the best option under these circumstances:
- You share the inheritance with family members
- The property needs serious repairs
- You don’t want to relocate
- You can’t afford the mortgage and upkeep
Along with the usual tasks involved with selling a property, you will have to go through these unique obligations for an inherited property:
- Waiting for court to settle the estate
- Distributing personal belongings among family members
- Ensuring your mortgage payments are made
- Knowing how to report sale proceeds
If you don’t want to go through a stressful selling process, you can sell your property as is.
Inheriting a house with siblings can come with a lot of complications. Disputes over the property might happen.
If the family agrees on selling the inherited property, it is best to split the proceeds evenly. If one of the family members wants to keep the house while you want to sell, ask them to buy your shares of the home.
Inheriting Real Estate: Getting Out of a Sticky Situation
Inheriting real estate can be a sticky situation that you didn’t ask for. It gets especially complicated if other family members are involved.
When you inherit a home or property of any kind, you probably don’t know what to do next. In most cases, heirs want to sell the property to remove ownership.
By reading this guide, you can understand the taxes involved with an inherited property to make an informed decision on if you should keep or sell it. If you plan to sell, follow the above tips.
Don’t forget to keep coming back for more real estate advice!
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