BelongHome.com | Blog
By Melanie Kershaw, February 15th, 2023
If you inherited a property in the last twelve months, you might be wondering about what the tax considerations are for the upcoming tax season.
Most inheritances aren’t considered income for federal tax purposes. What happens next is where it becomes less straightforward. Whether you sell the house, move in, or rent it out will change the tax implications for the property.
There are four main taxes that could apply to an inherited property as part of a transfer of estate:
- Federal Estate Tax
- State Estate Tax
- State Inheritance Tax
- Federal Gift Tax
In this article, we will look at the tax considerations for inherited property based on federal and state taxes, as well as whether you choose to keep or sell the home.
The only way to avoid capital gains tax on selling a property you have inherited is to move in and make yourself at home. There are generous tax exemptions for your primary residence, but you must have lived in the home for at least two out of the last five years — so it’s not a short-term option. You will also need to pay state property taxes and local levies for your new home.
