Quick Answer: Do You Have to Pay Capital Gains on Inherited Property?
Yes, but only if you sell the property for more than its market value at the time of inheritance. Thanks to the IRS “step-up in basis” rule, most people only pay capital gains on any appreciation after they inherit the home.
How Capital Gains on Inherited Property Work
Capital gains tax is only triggered when you sell the property—not when you inherit it.
The IRS allows a step-up in basis, which means the property’s tax value is adjusted to its fair market value (FMV) at the time of the original owner’s death. This significantly reduces your tax liability.
Example:
- Your aunt bought her house in 1995 for $80,000.
- When she passed away in 2024, it was worth $350,000.
- You sold it in 2025 for $360,000.
- Your capital gain is just $10,000—not $280,000.
The step-up in basis rule is what saves most heirs from paying huge capital gains taxes.
State-by-State Capital Gains Tax Rules
Even though federal capital gains laws apply everywhere, each state has its own rules. Some have no income tax, while others charge a percentage of your gain.
|
State |
Capital Gains Tax Rate |
Notes |
|
California |
Up to 13.3% |
Treated as regular income; no exemption for inheritance |
|
Florida |
0% |
No state income or capital gains tax |
|
Texas |
0% |
No capital gains tax at the state level |
|
New York |
Up to 10.9% |
Taxed as personal income; step-up basis applies |
|
Illinois |
4.95% |
Flat rate for capital gains |
|
Arizona |
0% |
Repealed state capital gains tax |
|
Oregon |
Up to 9.9% |
Follows federal rules but includes gains in state income tax |
|
North Carolina |
4.75% |
Capital gains included in flat income tax rate |
|
Pennsylvania |
3.07% |
Taxed separately from regular income |
|
Nevada |
0% |
No state income tax at all |
Pro Tip: Check with a local CPA or tax advisor. State tax rules change frequently and inherited property has unique legal nuances.
How to Avoid or Reduce Capital Gains Tax
Good news: you’ve got options to minimize (or eliminate) what you owe.
- Sell soon after inheritance: If the property hasn’t appreciated much, your gain may be zero.
- Live in it for 2 years: Qualify for a $250K exclusion (or $500K for couples) if it becomes your primary residence.
- Document everything: Closing costs, improvements, and even staging costs can reduce your taxable gain.
- Use a 1031 exchange (advanced): If you reinvest in another property, you may be able to defer taxes entirely.
Real-Life Example: What This Looks Like in Action
“When my father passed away, I inherited his home in Phoenix. I wasn’t sure what to do or if I’d owe taxes. I used DealMate to compare cash offers and agents. I sold within three weeks, and because the value hadn’t changed much, I paid zero in capital gains. It was way easier than I thought.”
— Stacy R., Glendale, AZ
Selling Inherited Property: Cash Buyers vs Discount Commission Agents
Once you’re ready to sell, it’s time to figure out how.
Cash Home Buyers
- Fast closings, sometimes in 7–14 days
- No repairs or cleaning required
- Ideal for properties that are dated or need work
Discount Commission Agents
- List on the MLS for 1–2% commission
- Best if the home is market-ready or recently renovated
- Keeps more equity in your pocket than traditional 6% agents
Not sure which is best? DealMate shows you both options side-by-side so you can decide based on real numbers—not guesswork.
Why DealMate Makes Selling Inherited Property Easy
At DealMate, we’ve helped thousands of people turn inherited homes into cash, peace of mind, and freedom—without stress.
We’re not a buyer. We’re your home sale comparison tool. In just minutes, you can:
- Get cash offers from local buyers
- See agents who offer discounted commission rates
- Compare timelines, costs, and what you’ll walk away with
No hidden fees. No pressure. Just smarter choices, faster.
Final Thoughts
So—do you have to pay capital gains on inherited property? You might. But thanks to the IRS step-up rule, smart timing, and the right sale strategy, you can minimize what you owe—or avoid taxes altogether.
Whether you’re leaning toward a quick cash sale or want to explore listing with a discount commission agent, DealMate gives you real choices with zero pressure.
FAQs About Title Companies and DealMate’s Process
If the selling price is close to the value at the time of inheritance, you likely won’t owe much—if anything—thanks to the step-up in basis.
Yes—if you make it your primary residence and live there for at least two years, you can exclude up to $250,000 in gains ($500,000 if married).
Not directly—but we connect you with real cash buyers in your area and show you multiple offers so you stay in control, or discount commission agents if listing is the better option for your situation.
It depends on your goals. If you want speed and simplicity, cash is great. If you want top dollar and have time, listing with a discount agent could be better. DealMate lets you see both options before making a decision.
Unlock Your Home’s Best Cash Offers Today!
Compare top cash buyers—quick, secure, and free. Let DealMate guide you to the best deal with confidence.
