What You Should Know About the Tax Consequences When Selling an Inherited House

equityreliefsoluti
Aug 20
4 min read

Updated: Oct 8

By: Russell Mosley, CEO, Equity Relief Solutions

You’ve Inherited More Than a House—You’ve Inherited a Legacy

When you inherit a home, it doesn’t arrive neatly packaged. Instead, it comes wrapped in memories, tangled in emotions, and layered with decisions that can feel both urgent and overwhelming.

I’ve had the honor of walking alongside families during some of life’s most delicate transitions. If you’re reading this, you might be navigating the grief of losing a loved one while trying to figure out what to do with a house that now bears your name.

Maybe you’re contemplating selling it. Perhaps you’ve already made that decision. But one thing is clear: you want to do it right—with dignity, financial wisdom, and respect for the person whose home it once was.

Let’s explore what many fear but few fully understand: the tax consequences of selling an inherited home.

This isn’t just a financial lesson. It’s a story about empowerment, preparation, and turning a life chapter into a steppingstone forward.

1. First, Take a Breath: Inheriting Doesn’t Mean Owing

Let’s clear the air: you do not owe taxes simply for inheriting a house.

That’s a common fear I hear from clients. And I get it—tax talk can feel like a trap sometimes. But here’s the truth:

There’s no federal inheritance tax for the vast majority of Americans.
If you sell the home, you may owe capital gains tax—but only on the profit.
Thanks to a powerful rule we’ll discuss next, even that might be minimal.

This is your first step in reclaiming peace of mind.

2. The “Step-Up in Basis” Rule: A Gift You Didn’t Expect

One of the most empowering tools in this journey is the Step-Up in Basis rule. It’s technical in name, but deeply human in impact.

Here’s what it means:

If your loved one bought the house decades ago for $80,000, and it’s worth $280,000 today, your inherited tax basis is “stepped up” to the home’s fair market value on the date of their passing.

That means if you sell it for $280,000, you owe nothing in capital gains. If you sell it for more—say $290,000—you’re taxed only on the $10,000 gain, not the full $210,000 difference from when they bought it.

This rule is a quiet guardian of your inheritance. It honors that this home grew in value under someone else’s care—and doesn’t punish you for their years of ownership.

3. When You Do Sell, Timing (and Support) Matters

Selling an inherited house isn’t a race. You have time to grieve, sort through belongings, and plan.

From a tax standpoint, you’re treated as if you’ve owned the property for more than one year, regardless of when you sell. That means you’re eligible for long-term capital gains rates, which are typically much lower than short-term ones.

Translation? More money stays in your pocket.

But here's my advice: don’t navigate this alone. There are emotional landmines in this process. Having a trusted guide—real estate advisor, tax pro, or a team like ours—makes all the difference.

4. You Can Deduct More Than You Think

Here's an empowering truth many people don’t realize:

The cost of selling the home can reduce the taxes you owe.

Real estate agent commissions, attorney fees, closing costs, and even reasonable improvements made before selling—these can all be deducted from your sale proceeds to lower your taxable gain.

In essence, the effort you put into responsibly selling the home doesn’t just honor your loved one—it protects your financial future too.

5. What If You Sell at a Loss? That Can Work in Your Favor

Sometimes the home sells for less than its appraised value—especially in shifting markets. If that happens, you might actually qualify to claim a capital loss, which can help offset gains on other investments or reduce your taxable income.

Loss doesn’t always mean loss. Sometimes it’s a door to new possibilities.

6. Joint Heirs, Shared Emotions, and Fair Distribution

If you inherited the property with siblings or other relatives, remember: the home carries emotional equity, not just financial equity.

You’ll need to divide proceeds fairly and navigate each person’s tax liability. This can get complex—but with the right facilitation and compassion, it can also be healing.

I’ve seen fractured families find closure in this process. When handled right, selling an inherited home can be the moment when family history becomes family strength.

7. A Final Word: You’re Not Just Selling a House. You’re Reframing a Legacy.

At Equity Relief Solutions, we don’t just talk numbers. We talk hearts, hopes, and healing.

I created this company because I believe people deserve more than legal language and cold paperwork when life hands them a complex transition. You deserve a team that sees you, hears you, and honors your story while helping you protect what’s rightfully yours.

So if you’re here, standing at the crossroads of memory and momentum, please know:

👉 You are not alone.

👉 You have more options than you think.

👉 And you can do this with clarity, confidence, and care.

We’re ready when you are.

With Respect and Hope,

~*Equity Relief Solutions*

📞 Call Us Today to Get Your Relief Started: (612) 454-5244

✉️ Email: help@equityreliefsolutions.com🌐 Visit: [www.equityreliefsolutions.com]

Understanding Your Options: More Than Just Selling

Inheriting a home is more than just a financial transaction. It’s a journey through memories and emotions. As you navigate this path, consider your options carefully.

Exploring Alternatives to Selling

Sometimes, selling isn’t the only route. You might consider renting the property. This can provide a steady income while allowing you to hold onto the memories tied to the home.

The Emotional Weight of Decisions

Every decision carries emotional weight. It’s essential to take your time. Reflect on what feels right for you and your family.

The Role of Professional Guidance

Engaging professionals can ease the burden. A real estate agent can guide you through the selling process, while a financial advisor can help you understand the implications of your choices.

Finding Closure

Ultimately, this journey is about finding closure. It’s about honoring your loved one’s legacy while paving the way for your future.

Conclusion: Embrace the Journey

As you navigate this complex landscape, remember that you are not alone. There are resources and people ready to support you. Embrace the journey with an open heart, and know that brighter days are ahead.

Together, we can turn this chapter into a new beginning.