Will I need to pay taxes on the sale of the home that was willed to me?
I was recently willed a home. It is being sold as part of the estate. I was sent a 1099-s form by the lawyer handling the sale. I have my own home. Will I need to pay taxes on the sale of the home that was willed to me?
The original cost basis of the home is the price the owner paid for it. If you inherit the home, you receive a "step-up in basis". This means the cost basis of the home to you is its fair market value at the date of death. For example, if the home was originally bought for $20,000, that is its cost basis. Let's assume that the home is worth $200,000 at the time of the owner's death. Your cost basis is $200,000. If you turn around and sell the house for $200,000, you will not owe any capital gains tax because the difference between the selling price and your cost basis is zero. Since you received a 1099-s, the house has been sold. When you file your annual income taxes, you will include the 1099-s and it will be offset by your cost basis.
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