Wednesday, October 6, 2021 / by Brian Armstrong
You have inherited a house… now what? Inheriting a house while often a generous gift can also be the start of an emotional journey. It is common to inherit property as a result of a loved one’s death, and now you have several choices ahead of you as a result.
To best navigate your situation, you should seek the advice of a tax and or finance professional to truly understand your position. We are not tax professionals, and this article is merely a guide to outline some of the options you have available. With professional guidance, you will know all your options and should have a clearer path forward!
Do I Owe Taxes On Inherited Property?
One of the most common questions we see when someone inherits a house is “Do I owe taxes on this?” Vermont does not have an inheritance tax, but it does have an estate tax, and of course the federal estate tax. The estate tax in Vermont is intended for the estates of Vermont residents, and the estates of non-residents who own tangible personal property, real estate, or income-generating property in the state. Your three main options ahead are to move in, rent the property or sell it and each of these will have different tax implications for you.
In Vermont when you are the recipient of an inherited property, you will be able to use the step-up tax basis meaning you will inherit the home at its fair market value. Should you choose to sell the property, you will only pay a capital gains tax on the increase from the value when inherited and the price it sells for.
What Other Issues Should I Think About?
Inheriting a property may not be as simple as it seems. There are many different factors that will dictate your next move. You may be in a situation in which there is still a mortgage on the home. If there is you will want to look at the terms and conditions of the mortgage with your tax of financial professional and they will help you understand what you are allowed to do with your property.
Another thing to consider when deciding what to do with your property is the overall condition of the building and land. You may want to hire a home inspector to come out to the property. They will be able to explain in detail what is wrong with the property and what if anything, would need to be fixed prior to selling or renting the property. The biggest things that commonly disrupt the selling process are furnaces, foundations, and roofs.
Who Else Inherited the Property?
In a will, it is very common that multiple people will be listed to inherit a property, such as a sibling. If you are in this situation you will have to work with the other party or parties to determine the best course of action. If you can work with the other party you may be able to sell the property and split the profits, rent the property together, do a buyout, or set up a promissory note. If you cannot agree with the other party or parties you may need to involve the courts to force a sale, however, this can be a long process, and be each party will most likely net less profit.
While there is no single one solution fits all approach hopefully this guide has helped you understand some options you have as you think about what to do with your recently inherited property. If you have any questions or need help selling, or renting your property contact us today at email@example.com