Will we owe tax when we sell an inherited house?

Usually little or none, if you sell soon after the death. Inherited property takes a new basis equal to its value on the date of death, so you're taxed only on what it gains after that.

This is the stepped-up basis. The gain built up during your parent's lifetime isn't taxed to you.

An illustrative example

A parent bought a house in 1985 for $150,000. It was worth $900,000 on the date of death. The heirs sell it eight months later.

All figures are estimates for illustration only and are not tax advice. Confirm with your tax adviser.

Without the step-up, the gain would have been $710,000. With it, the heirs show a loss after selling costs. Ask your tax adviser whether that loss is deductible in your situation.

What else to know

• It's always long-term. Any gain on inherited property is taxed at long-term capital gains rates, however soon you sell.
• Waiting adds gain. If the house rises in value while the heirs hold it, that increase is taxable when they sell. Improvements the heirs pay for are added to the basis.
• Each heir reports their share. Heirs who own a share report their part of the gain or loss on their own returns.
• Virginia has no estate or inheritance tax. The federal estate tax applies only to estates above $15 million per person in 2026.
• Revocable trusts keep the step-up. A house held in your parent's revocable trust generally still gets a stepped-up basis at death.

If one parent is still living

When a jointly owned home passes to the surviving spouse, generally only the deceased spouse's half is stepped up. Will I owe capital gains tax when I sell my house? walks through that case, including the surviving spouse's two-year window for the $500,000 exclusion.

Document the value

Get a date-of-death appraisal. It establishes the basis, and it's much easier to get close to the date than years later. A sale on the open market within months of the death is also strong evidence of value.

For more on selling a home after a death, see how I approach estate sales.

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