How Not to Pay Taxes on Real Estate

• A new survey shows fewer than half of Americans expecting an inheritance feel comfortable about responsibly handling wealth.

• Most surveyed don’t feel confident about handling issues related to how not to pay taxes on real estate.

• Having a clear plan will help with decisions related to making the right decisions for you and your family.

Less than half of all Americans expecting to receive an inheritance feel comfortable financially handling wealth, according to one of the largest U.S. life insurance companies. Most don’t feel confident about issues revolving around how not to pay taxes on real estate.

The New York Life survey showed that only 42% of Americans expecting to receive an inheritance feel they’re prepared to handle a wealthy windfall. Selling a home which is inherited might seem great but there are a series of challenges that come with the payoff.

Having a clear plan may be the best way to avoid hassles. Being prepared can help find it easier to make decisions on whether to sell a home that has been in the family for years or keep it when the time arises. Legal obstacles become easier to overcome when you have enough information and are prepared to make decisions.

It’ll be helpful if whoever you’re inheriting from has a plan. Their preparation may help you find it easier to sell the house when you’re ready. Selling an inherited home takes longer than your own home regularly for a variety of reasons. The obstacles multiply when you sell an inherited house for many reasons.

Probate is the process of changing ownership when a person dies in testate or without a will, and it’s handled by the court. The home you inherit will often go through the probate process, and you have to wait until it’s over. You don’t fully own the property, so you can’t sell it without a legal decree.

Expect the probate process to last months and sometimes more than a year. It’s one of the major causes of real estate delays affecting people trying to sell homes they inherit.

An inherited home is rarely passed to just one person. Sharing ownership with siblings or other relatives in an inheritance is common. That means that you can’t make major decisions without asking for their approval. If one of the people you share the inheritance with is hesitant or slow giving their feedback, the sale of a property will stall.

Taxes may be the most confusing part of the process when selling an inherited home. You don’t pay income tax on the inheritance itself, but you may owe capital gains taxes. If your parents paid $150,000 for the house when they bought it, but it was worth $250,000 when you inherited it, your taxable gain will be the profit you make above $250,000.

It’s advisable to talk with a tax expert before you list the home for sale. They’ll give you helpful home-selling advice so you can avoid making mistakes that will cause you to pay more taxes on the funds you receive.

It’s possible to avoid or lower the capital gains taxes paid on an inheritance if you plan and are strategic. Using the house as a primary residence for at least two years is a move that can help you qualify for a home sale exclusion. If you wait too long to sell a house you inherited its value may increase, triggering additional taxes due. Being quick to act is a good way to lower the capital gains tax you may pay later if you sell at a much higher price.

Sometimes it’s better to sell a home you inherit, and in some cases you’ll be better off keeping it. You can keep the home if it doesn’t have a mortgage. If it does have a mortgage banks often work with the parties who inherit homes on assuming a mortgage. Whatever the case, there are certain ways an accountant can advise you on how not to pay taxes on real estate when it is inherited.

Renting an inherited home is also an option. But a home that needs a lot of repairs may be financially draining and it may be less stressful to sell.

Selling an inherited home may not be easy because you have to go through probate when the deceased dies in testate or without a will. Hopefully, you’re new windfall of cash will eventually be worth it.