For many, inheriting a home in Los Angeles can be a walking paradox to experience: overnight, you are left with property of sizable value you can use to improve your life while still also processing and mourning the loss of a loved one. For those who are pondering the next best move to make in this common situation, understanding the tax consequences when selling an inherited property can absolutely inform your ultimate decision on how to handle the property itself. Thankfully, tax laws have been designed in such a way not add additional burden upon the person inheriting the property. Typically, the financial consequences are less daunting than what you would expect, which is good news for you.
Please keep in mind that the following is not tax advice and we are merely sharing the result of our experiences. To understand tax implications of your specific situation, please consult a tax attorney.
Tax Consequences when selling a house I inherited in Los Angeles, CA
Calculation of basis
In order to better understand how you’ll be taxed having inherited a home, you need to know how basis is calculated. In this case, basis refers to the asset cost for purpose of the calculation of capital gains along other taxes. When a person dies, the value or basis of their property in Los Angeles is increased to the market value as at the time of their death. For instance, if a person purchased a home 20 years ago for $25,000 but it was worth $100,000 at the time of their death, that property would be valued at the latter amount for the purpose of calculating capital gains.
Utilizing the services of a professional home appraiser is the most accurate way of calculating the fair market value of a home. However, it is possible to crunch the numbers without hiring an appraisal service by analyzing the sale prices of similar homes that have sold in the prior 6 months in the same neighborhood.
Taxation of gains/losses
Capital gains or losses refer to what you earn from selling property that you use for either personal or investment purposes. Such can be houses, furniture and many more things. If you decide to sell an inherited home in Los Angeles, that sale is regarded as capital gain or loss for the purpose of income tax. In most cases, for you to qualify for lower rates of long-term capital gains, you are required to have held that property for at least a year. However long the duration you have been in ownership of an inherited home, any gain or loss will still be treated as long-term.
Regarding capital gains on inherited property (and losses), you can claim a capital loss on inherited property if you sold it and all of these are true: You sold the house in an arm’s length transaction. You sold the house to an unrelated person. You and your siblings didn’t use the property for personal purposes.
Reporting the sale
Upon selling an inherited home, you have to report it for the income tax purposes. You should first calculate your capital gain or loss. This is done by subtracting the basis from the sale amount. You should then report that amount to the necessary authorities.
Having an inherited home can be stressing given the fact that you have new property to take care of and pay taxes for it at the same time… You should go through the probate process in Los Angeles as the first step to selling your home. Fair Sale Homes can refer you to a reputable probate attorney where you don’t pay any retainer fees upfront but actually collect on the backend of the property sale. That said, you will need to pay between $1,000 and $2,000 upfront for state filing fees.
Once an executor or admintrator is appointed, the court will then authorize you to proceed as you wish. If there are any other individuals involved in the inheritance, you should first agree with each other on that decision. You can then file a petition requesting the court to allow you to sell the property.
You should then consider how much tax you are to pay. This will be paid against the capital gains or losses resulting from the sale of the house. You can call Fair Sale Homes now at (626) 863-7006 to undertake a smooth and legitimate sale of your home. We are local here in Los Angeles CA and we know the market here better than anyone else. If you are still asking yourself what are the tax consequences when selling a house I inherited in Los Angeles, then we would be happy to discuss it with you in more detail.
Selling an inherited house in California can relieve you of quite a burden because California is such an expensive state to live and do business in. In addition to that, selling the property to an investor is a basic simple and fast process. Contact us for inquiries on how to go about things when selling your home in Los Angeles and we will be glad to help you.