Schedule a Consultation Today  |  624 North Front Street, Wormleysburg, PA 17043

Law Blog

What to Do with an Inherited House

Generally, there are three options to choose with an inherited house: live in it, rent it, or sell it, and deciding how to proceed can be overwhelming.

Generally, there are three options for when you inherit the family home. These options include – live in it, rent it, or sell it. If you’re unsure about how to handle the newly inherited house then entire process can be overwhelming.

Taxes on an Inherited House

For tax purposes, the IRS treats an inherited house as an asset like inherited stock. This means you get a tax benefit from the inherited house. When you decide to sell the house, the capital gains on the sale of the property would be based on a “stepped up” cost basis (the fair-market value at the time of the decedent’s death) and not the decedent’s original purchase price. For example, if your dad purchased the house for $100,000 in 1980 and its fair market value of the house at his death in 2017 was $350,000, the capital gain would be the difference between that updated amount and the sale price.

Living in the House

inherited houseIf you live in the house, the tax treatment will change if you live there for at least two years. If you later sell the property, you would be permitted to use the current capital gains exclusions on primary residences if you lived there for at least two years.

Renting the House

Choosing to rent the house can provide some additional monthly income. However, this can be a hassle with maintenance, tenant payment, and retaining tenants. Some heirs will hire a property management company that takes over many of the duties of the landlord.

Selling the House

When selling an inherited property, keep in mind that it may take a while to prepare the house for sale. If there is a mortgage on the property, that debt will either need to be paid off or the proceeds from the sale of the property will be needed to satisfy those obligations. If the property is underwater (the amount of the mortgage is greater than the market value of the property), then it may be best to discuss a short-term sale with the lender.

What If I Don’t Want The House?

If you do not want to deal with the property at all, you do not have to accept the gift.

Feb 21, 2018 | Articles

Check Out Our Downloadable Guides

Our team has the knowledge and experience to provide you with sound legal advice and representation.

About Cherewka Law

We are a law firm in Harrisburg, PA dedicated to providing comprehensive, highly personalized planning services to individuals, couples, families and businesses.

Start the Conversation

Send us a message today!

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Download Your Elder Care Planning Guide Today

Learn how you can begin planning for the care of the elders in your life. Receive a download of our most current Elder Care Planning Guide by clicking the download button and filling out your information.

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

Download Your Probate & Estate Administration Guide Today

Learn where you stand in your Estate Administration process. Receive a download of our most current Estate Administration Guide by filling out the form below.

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

Download Your Estate Planning Guide Today

Learn where you stand in your Estate Planning process. Receive a download of our most current Estate Planning Guide by filling out the form below.

"*" indicates required fields

Name*
This field is for validation purposes and should be left unchanged.

Call Now Button