Tax Tip of the Week: Is money I received from an inheritance taxable? Will I Owe Tax if I sell my parent’s house that I inherited?

Home » Blog » Tax Tip of the Week: Is money I received from an inheritance taxable? Will I Owe Tax if I sell my parent’s house that I inherited?

Will These are common question from my clients. Like most things in tax law the answer is not simple.

First, property received from an inheritance is not taxable. This includes cash, property, stocks & bonds, below-market sales, debts that are forgiven and partial interests in property.

But income in respect of a decedent is taxable. These are items that would have been included in decedent’s gross income if received before death. These include IRA distributions, accrued interest and dividends, tax-deferred annuities, Series EE bond interest, etc.

As to selling your parents House – If you sell property that you inherited it is taxable. But, the gain is calculated using the fair market value (FMV) at the date of death (or the FMV on the alternate date if an Estate Tax Return is filed and alternate valuation is elected).

So, if your parent’s house is sold within a few months of you inheriting it is very unlikely that you will have a taxable gain unless the value has dramatically increased in the short amount of time that you owned it. But, if the value has increased since you inherited it than you will be taxed on the increased value.

 Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.