A recent death in the family is hardly a time to think about serious financial matters, and yet, that’s often the situation people find themselves in. When a loved one passes, their material possessions—including their homes—become something to address almost immediately.
So, what happens when you inherit a house you don’t want? How do you handle home selling or home taxes? And how do you earn capital gains from the property despite the capital gains tax?
In this article, we will discuss what happens when you inherit a house and what your options are. We will also talk about how to handle estate taxes and other legal matters related to inheriting property.
Weigh Your Options
If you have recently inherited a house, the first thing you should do is consult with a lawyer to discuss your options. You may be able to sell the property, rent it out, or live in it yourself.
If the house is in good condition, you may be able to get a good price for it if you sell it. However, if the house needs repairs, you may want to consider renting it out or living in it yourself.
If you decide to live in the house, you will need to make sure that all of the necessary repairs are made before moving in. This often includes things like fixing any damage that may have been caused by water leaks, repairing the roof, and making sure that the electrical and plumbing systems are up to code.
You will also need to change the locks on all the doors and get rid of any old furniture or belongings that may be in the house. This can be a daunting task, but it’s important to do in order to make sure that the house is safe and secure.
Determine the Property’s Worth
You could also consult with a real estate agent to get an idea of what kind of price you can expect to get for the property. Or even look up the prices of similar properties in the area to get an idea of what your property is worth. The agent can also help you find a buyer who is willing to pay the price you are asking for the property.
Just keep in mind that there’s always an alternative.
You could reach out to Coveway Properties to buy the property as-is. Coveway Properties will offer cash for any property in poor condition—ideal for homeowners who have a difficult time selling their properties.
This includes homes that are or are about to be in foreclosure, inherited property, homes with structural or sewage issues, as well as damage caused by renters. They even work with properties currently struggling with squatters who refuse to vacate the property.
While a real estate agent focuses on finding a buyer when you use a company like Coveway Properties, you’re dealing with the buyer directly. That ensures your home is sold quickly, fairly, and at the right price.
Calculate Estate and Capital Gains Tax
Estate taxes can be a big issue when inheriting property. They’re levied on the value of the property at the time of the owner’s death. If the property is worth more than the estate tax exemption, which is $12.06 million for 2022, then the estate will owe taxes on the difference.
People believe the estate tax is 40% on any taxable amount, but that isn’t true. Generally, you pay a base tax plus a marginal rate for the federal estate tax. For taxable amounts greater than $1 million, federal estate taxes top out at 40%.
You will also need to consider any capital gains taxes you may owe. Capital gains taxes are levied on the profit you make from selling the property. The capital gains tax rate is currently 0%, 15%, or 20%. The higher your income, the higher the rate.
You may be able to avoid paying capital gains taxes by using the home as your primary residence for at least two years before selling it. They don’t have to be consecutive.
Gains from the sale of a house you have not lived in for at least two years can be taxable. Selling within a year is especially costly because short-term capital gains tax is higher than long-term capital gains tax.
There is Always a Solution
Inheriting a house can be a challenging process, but if you take the time to understand all of your options, it can be a very rewarding experience. It’s just important to understand all the legal and financial implications before making any decisions.
If you’ve been asking yourself “How do I sell my house for cash?” Coveway Properties is here to help. Simply contact our team today. We would be more than happy to help you navigate this tricky process.