Inheriting a home can feel like a confusing situation. On one hand, you suddenly own a valuable property that could change your life for the better. On the other hand, you might still be feeling the sadness of losing someone you loved. If you are thinking about what to do next, it’s important to know the tax implications of selling an inherited property. This information can help guide your decisions about the house. The good news is that tax laws are made to ease the burden for those who inherit property. Usually, the financial impact isn’t as tough as you might think, which is a relief for you.
Tax Consequences when selling a house I inherited in Oklahoma, Oklahoma
Calculation of your stepped-up basis
The starting point for figuring out your potential tax exposure when selling an inherited house is calculating your “basis.” When a loved one passes away, the property’s basis is typically “stepped up” (or in some cases “stepped down”) to the fair market value as of the date of death. This adjustment can substantially reduce, or sometimes eliminate, the taxable gain when you eventually sell the property in Oklahoma.
For example, if your relative originally purchased the home for $100,000 and at the time of their passing the property’s fair market value was $200,000, your new stepped-up basis is generally $200,000. If you sell the home for $210,000 later on, your taxable gain would only be $10,000—assuming no other adjustments—rather than $110,000 if the old basis were used.
Taxation of gains or losses
Once you’ve established your stepped-up basis, you can calculate the gain or loss on the sale of the inherited property. The difference between the selling price and your basis (plus any allowable selling costs or adjustments) forms the basis for capital gains tax. Because inherited assets are generally treated as long-term holdings, any gain from the sale is classified as a long-term capital gain, regardless of how long you’ve actually held the property.
- Long-Term Capital Gains Rates: These may vary depending on your overall income level. Most taxpayers fall into brackets ranging from 0% to 20% for long-term capital gains on federal taxes.
- Losses: If you sell the home below your stepped-up basis, you might realize a capital loss, which can potentially offset other capital gains or reduce taxable income up to certain limits. However, complexities arise if you use the property for personal reasons, so consulting a tax professional is wise.
In Oklahoma, there is no separate state inheritance tax to worry about for most estates, as it was phased out in 2010. However, other state level taxes and fees, such as property tax or transfer fees could still apply. Make sure you verify any local requirements or assessments specific to your county.
Reporting the sale
When you sell a home that you’ve inherited, it’s important to report it for your income taxes. Start by figuring out if you made a profit or loss. You can do this by taking the sale price and subtracting your basis. After you have that number, you need to report it to the right tax authorities.
Inheriting a home can be overwhelming because you now have a new property to manage and are also responsible for its taxes. Your first step in selling the home should be to navigate the probate process in Oklahoma. This legal process will give you the court’s permission to move forward with your plans. If there are other heirs involved, it’s important to come to a mutual agreement before proceeding. After that, you can submit a petition to the court asking for approval to sell the property.
Next, think about the taxes you might owe. This applies to any gains or losses you have from selling your home. You can reach out to Green Country Home Buyers right now at (918) 921-9892 for an easy and genuine home sale. We know the local market in Oklahoma, Oklahoma better than anyone else. If you are wondering about the tax implications of selling a house you inherited in Oklahoma, we would love to talk more about it with you.
Letting go of an inherited home can lighten your load significantly. Plus, selling it to an investor is easy, straightforward, and quick. If you need guidance on selling your house in Oklahoma, reach out to us, and we’re here to assist you.