 TITLE: What to Do When You Inherit a House CONTENT: Do You Pay Taxes on a House You Inherited?\n------------------------------------------\nIf you decide to sell the house, you may be subject to taxes. Here's a quick rundown of potential tax liability to consider:\n**Estate Taxes**: In 2021, federal estate taxes may apply if the estate's combined gross assets and prior taxable gifts exceed $11.7 million. Additionally, AARP reports that 17 states and the District of Columbia have estate or inheritance taxes. Check with your state tax collector for more information.\n**Capital Gains Taxes**: If you decide to sell the home, your profits may be subject to a capital gains tax. The good news is you won't pay taxes based on what was originally paid for the house. The fair market value of a home resets upon the owner's death. So, if your parents bought their home for $50,000 and it's worth $500,000 now, the tax basis of your inherited home is $500,000. If you sell the house for $500,000, you won't have any taxable gains. If you sell it for $550,000, you'll pay capital gains taxes on $50,000.\nIf you decide to live in the house or rent it out, you'll pay property taxes on it, just as your relative did when they owned it. It may be part of the mortgage payment or separate from it. Depending on where you live, property taxes can be quite expensive; so as you decide how you will handle the inheritance, keep that cost in mind. END