We buy houses in Balcones Heights TX. As homebuyers in Balcones Heights, Texas, we frequently hear this question, “Are there tax consequences when selling a house inherited in Balcones Heights TX?” It can be hard to understand and untangle.
At first glance, the laws may seem fairly simple, but they get complicated and convoluted when you factor in all the legal ramifications and nuances of taxing authorities. The short version is that if you’ve made gains, you’ll owe taxes, and if you’ve 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’ve made of the house.
Are There Tax Consequences When Selling a House Inherited in Balcones Heights TX?
Losses or Capital Gains Tax in Balcones Heights?
The tax consequences when selling a house inherited in Balcones Heights TX 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 or a house. So, for income tax purposes, the sale of an inherited property in Balcones Heights TX is treated as a capital gain or loss.
The catch with selling an inherited home is that a gain or loss is considered a long-term gain or loss. Further, losses on personal property cannot be claimed as a tax deduction. So, when you inherit a house and use it as your personal home, it’s become personal property, and you can’t deduct a loss if you sell it.
IRS… Report the Sale of the Texas 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 the inflation-adjusted exemption amount.
The determination of the gain or loss on a house sale depends on the “basis” of the house. As the basis goes higher, the taxable gain from a sale decreases. There are, however, different rules for the sale of an inherited house that allow for a special stepped-up basis.
What Is “Basis” Determination in Balcones Heights, Texas?
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 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 TX House… Is It Required?
Naturally, after you have sold the house you inherited, you should report the sale (and the gains or losses) when you file your income taxes. To determine 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 (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 Balcones Heights TX 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.
Benefits of Selling to an Experienced Texas Homebuyer
When you are considering selling an inherited house, there are some very significant benefits to selling to a professional and reputable home-buying company such as Capstone Homebuyers. Not everyone is knowledgeable about the process of selling an inherited house in Bexar County and other counties surrounding the San Antonio metro area.
Sell My House in Balcones Heights TX
We are Balcones Heights TX home buyers, and we offer cash for houses in Texas. We have years of experience buying inherited houses in and around San Antonio, so you can sell your house in Balcones Heights, Texas directly to us. Not only can we guide you through the sales process, but we can also help you understand what can go wrong when you inherit a house and how to avoid common pitfalls. While our goal is to buy houses in Balcones Heights, we have a commitment to ourselves and to our community to be a source of knowledge and information for the people we work with. We know that we can best achieve our goals as a company when we buy houses and are out in the community doing the most good for those around us. Find out how this philosophy can make things easier than you could ever imagine when selling your inherited property. Give us a call or fill out our form today.