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Inherited Property

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Inherited property is an asset you acquire legally. You are probably receiving the property after a loved one’s death.

So, now that you have inherited a property, what’s next? Here is a guide that might help you to manage your inherited property.

Am I liable to pay tax on the property I inherited? Inheriting a house does not give you any tax liability. Mostly, you won’t have any immediate tax liability after you inherit a property.

However, certain situations may have you financially obligated, such as a mortgage, property repairs, debts, and property taxes, such as capital gains on inherited property in California. It depends on how you would want to manage the property.

What are my options in inheriting a property?

1. Move-in

When you choose to move into the property you inherited, note that you will still need to pay for the expenses for repairs, maintenance, HOA fees, debts, and yearly property taxes. By being the new owner, you will be the one to shoulder these expenses.

2. Rent it

Renting a house is not always about earning profit from the rental but also paying for house repairs, maintenance, and other tenant support expenses. You are still obligated to pay a property tax since you are still the property owner, but the upside is you can deduct some expenses from the rent payment.

3. Sell it

When it comes to selling an inherited property in California, there are still expenses you have to pay concerning the sale of the estate. These include home repairs, listing costs, hiring a real estate agent, and closing costs. Inherited property tax in California includes paying capital gain taxes.

What are capital gains taxes and step-up tax basis?

Federal capital gains taxes are paid based on investment profits. Your capital gains tax rate depends on your taxable income. The step-up tax basis protects most inheritors from capital gains taxes.

As the inheritor of the property, the step-up tax basis will protect you from paying the capital gains taxes and allow you to sell the property at its current market value. However, it looks like the date of the death of your benefactor. Being a recipient of property from inheritance will protect you from capital gains taxes.

Contact us today if you are interested to learn more about an inherited property or would like to sell an inherited property in California.