What happens to the cost basis when I inherit a house?

When you inherit a house, its cost basis steps up to the home's fair market value on the date the owner died – not what they originally paid. This is a major tax break. If your mother bought her home for $80,000 and it's worth $500,000 when she dies, your basis becomes $500,000. Sell it soon after for $510,000 and you owe capital gains tax only on the $10,000 of post-death appreciation, not the $430,000 of lifetime growth. It's wise to get a date-of-death appraisal to document that stepped-up basis. If you keep the home and rent it, you also get to depreciate from the new, higher basis. One caution: inheriting a house with a mortgage or in a community-property state has nuances, so confirm details before you sell. See wealthserene.com/tools/capital-gains.