Inheriting a house usually means a loved one has passed away. In this sad and often confusing time, it is important that you understand what it actually means to inherit property. The next steps you take will have lasting effects to your finances and beyond, so learn everything you can about the process and the possible consequences.
Taxes are probably among the first things you consider after you’ve inherited property. Fortunately, there is no Federal inheritance tax. Some states do have their own inheritance tax but most of the time, you’ll be in the clear. Most tax liabilities will only be triggered once you’ve figured out what you want to do with your property.
While you decide on the future of your property, the IRS establishes a fair market value for it. It is the new or step-up basis for the property and it will influence tax amounts when you do sell.
If you sell your new property, a capital gains tax will be collected based on the profit generated by your asset. The taxes you’ll pay will be based on the difference between the fair market value and the selling price. If there is no difference, there will be no capital gains tax.
Since you’re still on the fence on what to do with the property, here are a few things experts recommend for you to do in the meantime.
— Update the homeowners’ insurance policy. Contact the insurance company and make changes where necessary.
— Stay on top of utilities. Cancel what you don’t need and keep paying for those that you do. It’s always a good idea to keep the light, heating, and water running, whatever you decide down the road.
— In the off chance that you do have to pay some taxes, find out what they are and pay them.
— If your property has a yard, you’ll also probably want to arrange for its upkeep. Overgrown hedges won’t only make your new house look unused, it may also attract the attention of burglars.
Putting off the decision too long can be costly since maintaining a house is not cheap. Here are the three options you’re most likely considering.
Property taxes can rise significantly after the house is reassessed at the current market value. If there are other joint owners, everyone must be on board with whatever you decide. If you want to live on the property, you may buy the others out, pay rent, or make the house part of your share of a larger estate. If you disagree with the other owners, there is often no other option but to go to court.
Before you move in, get the home inspected so you can be aware of maintenance and safety issues. Have these repaired first.
Renting out a property is not as easy as it sounds. The wrong tenant can mean damage, eviction, and many other bad things. Consider hiring a property manager to handle the marketing, leasing, and managing of your house.
Before you rent your property out, it is imperative that you have the necessary repairs done. You have a lot of liability as the property owner. On that note, you should also acquaint yourself with the renting regulations in your area.
There are many approaches you can take when you decide to sell. Contact real estate agents, particularly if you don’t live in the area, to assess the property and to device a marketing strategy. Work with them whether it is better to invest in renovations or sell the property in its current condition. Some companies like Straightforward Home Solutions buy homes for cash in as-is condition.
Like the conditions leading up to it, the inheritance of a home has the potential to significantly change your life. You have some big decisions ahead of you and you should take the time and the patience to deal with them. Good luck.