Inheriting a house can bring both joy and confusion, especially when it comes to taxes. A common question is: Do I have to pay capital gains taxes on my inherited property? The answer? Maybe.

Here’s how it works:

When you inherit a property, you benefit from something called a "step-up in basis." This means the value of the house adjusts to its current market value, rather than what your parents originally paid. For example, if they bought the home in 1979 for $60,000, and today it’s worth $400,000, the house’s value “steps up” to $400,000. This can potentially save you a lot on taxes. So, if you sell the home for the current market value soon after inheriting it, you're likely off the hook for capital gains taxes.

But here’s the catch.

If you hold onto the house for a few years, the market value might increase. For instance, at an average appreciation rate of 6.2% annually, that $400,000 house could be worth $476,000 in just three years. Now, you’ll owe capital gains tax on the difference—$76,000. Depending on your tax bracket, you could pay up to 37% of that amount in taxes.

Other Costs to Consider

Holding onto the house comes with additional costs, such as:

• Vacant home insurance
• Ongoing maintenance
• Property taxes

Plus, there’s always the risk of unexpected issues, like a burst pipe or a break-in.

We’ve seen families hold onto an inherited house for a decade or more, thinking they’ll "get to it." However, as the house’s value rises, so do their tax obligations, turning what could have been a quick decision into a costly wait.

Act Now, Save More

At KC Legacy Properties, we understand the challenges of managing inherited properties. Don’t let taxes, time, and uncertainty eat away at your inheritance. We can help you create a plan that simplifies the process, turning a potential burden into a blessing.

Give us a call today at 816-307-7163

Let’s make sure you keep more of what’s rightfully yours.