I hope this guide makes things a little clearer. If you need help with the house, I’m happy to talk it through with you. Feel free to reach out.
Jolene Baijot | Real Estate Agent, CPRES, ABR · Updated September 2026
Quick Answer:
Inheriting a house usually isn’t a taxable event for the heir. When you sell, capital gains tax is based on the home’s value on the date of death, not what the original owner paid. That’s called a stepped up basis, and it often means little or no tax when an inherited home sells soon after. Estate tax applies only to larger estates, and only a few states have an inheritance tax.
If you’ve inherited a house, it helps to understand how taxes may affect a sale. The home’s value at the time you inherited it is usually an important starting point.
Do You Pay Taxes When You Inherit a House?
Generally, no. Receiving an inheritance usually isn’t income for federal tax purposes. Taxes come into play later, if and when you sell, and sometimes at the estate level for larger estates.
What Is a Stepped Up Basis?
Your “basis” is the starting value used to figure capital gains when you sell. For inherited property, the basis usually steps up to the home’s fair market value on the date of death.
Here’s a simple example. You inherit a home that the owner bought for $90,000 decades ago. Its value for your inherited basis is $500,000. If you sell it for $510,000, the taxable gain is generally based on the $10,000 difference, not the $420,000 increase since they bought it. Selling costs can reduce that gain even further.
How a Date of Death Appraisal Helps
A professional appraisal as of the date of death documents that stepped up value. Your CPA can use it when calculating the basis and any gain from the sale.
Capital Gains on an Inherited House
Inherited property is treated as held long term, no matter how soon you sell, so any gain is taxed at long term capital gains rates. If you sell soon after the date of death, the gain is usually small.
If you keep the house for years and it rises in value, the gain from the date of death to the sale is taxable. The home sale exclusion many homeowners use generally applies only if you’ve owned and lived in the home yourself for two of the past five years.
Community Property States
In community property states, such as Washington, Arizona, California and Texas, a surviving spouse may receive a stepped up basis on the entire home, not just the half that belonged to the spouse who passed. That can be a big benefit when the surviving spouse later sells. Your CPA can confirm how it applies.
Irrevocable Trusts
Some property held in certain irrevocable trusts doesn’t receive a new basis at death. If the home was in an irrevocable trust, have your CPA review it before you plan the sale.
Estate Tax vs. Inheritance Tax
Estate tax is paid by the estate before assets are distributed. The federal estate tax only applies to very large estates, and a number of states, including Washington, have their own estate tax with a lower threshold.
Inheritance tax is paid by the person who inherits. Only a handful of states have one, and close family members are often exempt.
Exemption amounts change, so check with a CPA about this year’s figures.
Frequently Asked Questions
Do I have to pay capital gains on an inherited house?
Only on the gain above the stepped up basis. If you sell soon after inheriting, it’s often little or nothing.
Should I sell an inherited house right away for tax reasons?
Selling soon after often keeps the taxable gain small, but there’s no tax deadline. Your CPA can help you compare keeping and selling.
Who pays the taxes when an estate sells a house?
It depends on whether the estate or the heirs sell and how the estate is set up. Your CPA and attorney can explain the details.
Is inherited money from a house sale taxable income?
The inheritance itself usually isn’t. Only the gain above the stepped up basis is taxed.
If you would like to keep reading, I also cover inheriting a house with a mortgage and how an estate sale compares to a trust sale.
About the Author
Jolene Baijot is a real estate agent and Designated Broker with more than 25 years of experience and over 1,000 transactions. She holds the Certified Probate Real Estate Specialist (CPRES) and Accredited Buyer’s Representative (ABR) designations and works alongside CPAs and estate attorneys on the sale of inherited homes. Learn more about how Jolene helps with probate and trust sales.
Thinking About Selling?
If a sale is on your mind, I can help you understand the home’s current market value and find an appraiser if your CPA needs a date of death valuation. Let me know if I can help.
This post is general real estate information, not tax advice. A CPA or tax professional can advise you on your situation.
