Selling Inherited House Texas: Tax Consequences to Know
If you're selling an inherited house in Texas, understanding the tax consequences is essential. Whether you’ve just inherited a home or you’re planning to sell soon, knowing what to expect can help you avoid financial surprises and make smart decisions.
Capital Gains Tax When Selling Inherited Property in Texas
One of the biggest tax concerns when selling inherited property in Texas is capital gains tax. Fortunately, the IRS offers a “stepped-up basis” rule. This means the property’s value is adjusted to its fair market value (FMV) on the date of the original owner's death.
For example, if your parent bought the home for $100,000 but it was worth $300,000 when they passed, your cost basis is now $300,000. If you sell it for $310,000, you only pay capital gains tax on the $10,000 profit — not the full $210,000.
Even if you sell within a year, the IRS treats gains on inherited property as long-term capital gains, which are taxed at a lower rate than short-term gains.
Inheritance Tax Rules for Selling a House in Texas
The good news is Texas does not have an inheritance tax or estate tax. You won’t owe state taxes just for inheriting the home. However, the federal government may impose an estate tax if the estate is valued over $13.61 million (as of 2024).
Property Tax Tips for Selling Inherited House Texas
Though there’s no inheritance tax, property taxes are still in play. Any unpaid property taxes must be paid off before you can transfer or sell the home. If the inherited property was someone’s homestead, you may also be eligible to maintain exemptions, such as the over-65 exemption or homestead exemption, if you move in and make it your primary residence.
How to Report Sale of Inherited House to the IRS
If you sell the inherited house and make a profit, you’ll need to report that gain on your IRS Form 1040, Schedule D. If you and your siblings inherited the home jointly, each person reports their share of the gain based on ownership percentage.
How to Avoid Capital Gains Tax When Selling Inherited House in Texas
Yes — under certain conditions. If you move into the inherited home and live there for at least two years, you may qualify for the home sale exclusion:
- $250,000 of gain is tax-free if you're single.
- $500,000 if you’re married and file jointly.
This rule applies to primary residences, so it’s only valid if you occupy the home for the required period before selling.
Best Options for Selling Inherited House in Texas
Selling an inherited house in Texas can feel overwhelming, but you don’t have to do it alone. Whether you’re handling probate, trying to avoid capital gains, or looking for a quick cash sale, the right support makes all the difference.
A cash home buyer can often help streamline the process by purchasing the property as-is, taking care of title issues, and closing quickly — especially helpful when you want to avoid holding costs or repair expenses.
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Frequently Asked Questions About Selling Inherited House Texas
Q: Do I have to pay taxes when I sell an inherited house in Texas?
A: You may owe capital gains tax, but thanks to the stepped-up basis rule, your tax burden could be minimal.
Q: What is the stepped-up basis?
A: It adjusts the property’s tax basis to its market value at the time of inheritance, reducing potential capital gains.
Q: Is there a deadline for selling an inherited house?
A: No, but the longer you wait, the more you may owe in maintenance, insurance, and property taxes.
Q: Can I sell a house during probate in Texas?
A: Yes, but it often requires court approval. You may want to speak with a probate attorney.
Q: What if multiple heirs inherit the house?
A: All heirs must agree on the sale terms and divide the proceeds based on ownership share.