If you have recently received inherited property, you may be wondering if you would have to pay taxes on that property if you sold it. Here are a few things to consider about whether you will have to pay taxes on selling inherited property.
Capital Gains Tax
Whenever you inherit property, that inheritance then becomes your property. If you sell the property for a financial gain, you will have to pay capital gains taxes on that piece of property.
Even though it might sound like a losing proposition for those that inherit property, you do get one advantage when it comes to selling inherited property. Whenever the individual dies and passes property onto you, the cost basis of that property then changes. The cost basis will change automatically to the fair market value of that property on the day that the individual died. Therefore, you are essentially getting around paying for any capital gains taxes on the appreciation that occurred during the lifetime of the deceased.
For example, let's say that you inherited $100,000 worth of stock that was originally purchased at $20,000. Whenever you receive it as an inheritance, the cost basis is going to change to $100,000. If you sold it for that amount, you would have no Gains taxes to worry about.