the date of death—your basis is “stepped up.”
For instance, if you inherit a house that was purchased several years ago for $100,000 and it is now worth $300,000, you will receive a step-up from the original cost basis from $100,000 to $300,000. If you sell the property right away, you will not owe any capital gains taxes. If you hold on to the property and sell it for $450,000 in a few years, you will owe capital gains on $150,000 which is the difference between the sale value and the stepped-up basis.
OTHER TAX
Heirs may have to pay property taxes as soon as they inherit real estate, and they will continue to pay them for as long as they own the house. Many states cap how much the assessed property value can rise from year to year; however, when someone buys or inherits real estate, it will be reassessed at current market value. Even if subsequent assessments are capped, the initial reassessment can result in heirs paying thousands of dollars more in taxes than the previous owner. Some states offer an exemption. California state law, for instance, states that if the heir is the spouse or child of the owner, there is no reassessment. They say where there is a will, there is a way. And, if the will names you as the sole or partial beneficiary of a home upon the death of a relative or friend, you will need to adequately prepare for the financial and personal ramifications. Being named as a beneficiary of the real estate in a will can present challenges as well as rewards. Unless you are the surviving spouse, in which case legal transfer of the property to
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