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LearnFAQEstate Planning

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

Answer

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.

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Educational disclaimer: All content on WealthSerene.com is for educational purposes only and does not constitute investment advice. Projections and calculations are illustrative — actual results will vary based on market conditions, your specific situation, and many factors outside this tool’s scope. Always consult a qualified financial professional for advice specific to your situation. View full disclosures →