Understanding the Tax Consequences When Selling an Inherited House in Indiana
Hello, this is Tony from Tony Buys Homes in Indiana. Today, we’re going to delve into a topic that many people find confusing: the tax consequences of selling an inherited house in Indiana.
What Does It Mean to Inherit a House?
Inheriting a house means that you’ve received the property as a result of a will or through the laws of intestacy if the deceased did not leave a will. This can be a bittersweet experience, as it often comes with the loss of a loved one. However, it’s important to understand the financial implications of this new asset, especially if you’re considering selling the property.
How is an Inherited House Taxed in Indiana?
The tax implications of selling an inherited house can be complex, but I’ll do my best to simplify it for you. In Indiana, there are two main taxes to consider: the inheritance tax and the capital gains tax.
Firstly, let’s talk about the inheritance tax. Indiana repealed its inheritance tax in 2013, and it was retroactive to January 1, 2013. This means if the person from whom you inherited the house died after this date, you won’t have to pay inheritance tax.
Capital Gains Tax
The second tax to consider is the capital gains tax. This tax applies when you sell an asset for more than you paid for it. However, when you inherit a house, the cost basis of the property is “stepped up” to the fair market value at the time of the previous owner’s death. This means you’ll only owe capital gains tax on any increase in value from the time you inherited the property to when you sell it.
Calculating Capital Gains Tax
To calculate the capital gains tax, you’ll first need to determine the “stepped-up” basis. This is typically the fair market value of the property at the time of the previous owner’s death. You can hire a professional appraiser to provide this value.
Next, subtract the selling price of the house from the stepped-up basis. If the result is a positive number, this is your capital gain, and you’ll owe tax on this amount. If the result is a negative number, you have a capital loss, which can be used to offset other capital gains.
Exemptions and Deductions
There are some exemptions and deductions that can reduce your capital gains tax. For instance, if you’ve used the inherited property as your primary residence for at least two years out of the five years before selling, you may qualify for the primary residence exclusion. This can exclude up to $250,000 of capital gains for individuals and $500,000 for married couples filing jointly.
How Can Tony Buys Homes Help?
At Tony Buys Homes, we understand that dealing with an inherited property can be emotionally and financially challenging. That’s why we offer a simple, hassle-free solution to help you sell your inherited house fast in Indiana.
By selling to us, you can avoid the stress and uncertainty of listing the property on the open market. We buy houses in any condition and can close in as little as seven days. Plus, we’ll handle all the paperwork and guide you through the process, so you can focus on what matters most.
Selling an inherited house in Indiana can have tax implications, primarily through the capital gains tax. However, with careful planning and the right help, you can navigate this process smoothly. Remember, it’s always a good idea to consult with a tax professional to understand your specific situation better.
At Tony Buys Homes, we’re here to make the process of selling your inherited house as easy and stress-free as possible. Contact us today to get a fair cash offer for your property.