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Capital Gains on Inherited Property

The stepped-up basis usually means little or no tax — here's how it works and what documents to keep.

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Capital Gains Guide

The Best Tax Break in the Code, If You Use It Right

The stepped-up basis is one of the most generous provisions in the U.S. tax code. Decades of appreciation can disappear from your taxable gain overnight when you inherit. But to lock in the benefit, you need a defensible date-of-death value — usually an appraisal — and you need to sell before the property appreciates significantly above it.

This guide is general information, not tax advice. Talk to a CPA before any sale. We can recommend NC-based CPAs who handle inherited-property sales regularly. Get a cash offer and we'll line up everything else.

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Frequently Asked

Questions Sellers Ask Us

Do I owe capital gains tax when I sell an inherited house?+

Usually very little. Inherited property gets a 'stepped-up basis' — your cost basis resets to the property's fair market value on the date of death. Capital gain = sale price minus stepped-up basis (and selling costs). Sell soon after inheriting, and the gain is often near zero.

What is stepped-up basis with an example?+

Mom bought the house in 1985 for $60,000. She dies in 2025 when the house is worth $300,000. You inherit, then sell in 2026 for $310,000. Your taxable gain is $10,000 (not $250,000). If you'd inherited her stock portfolio with the same numbers, same result.

How do I prove the stepped-up basis?+

An appraisal dated as close to the date of death as possible. Some heirs use a county tax assessment value, but appraisals hold up better with the IRS. Cost: $400–$600. Order one even if you don't plan to sell immediately — it's much harder to get an accurate retroactive value years later.

Is the sale short-term or long-term?+

Always long-term for inherited property, regardless of how long you actually held it. That means the lower long-term capital gains rates (0%, 15%, or 20% depending on your income) apply — never the higher short-term rates.

Does NC have its own inheritance or estate tax?+

No. NC repealed its estate tax in 2013 and has no inheritance tax. You may owe federal estate tax only on estates over the federal exemption (around $13.6M in 2026).

What if multiple heirs sell together?+

Each heir reports their share of the gain on their own tax return, using their share of the stepped-up basis. The title company issues separate 1099-S forms to each heir based on proceeds.

Can I avoid capital gains by living in the inherited house first?+

If you move in and make it your primary residence for 2 of the prior 5 years before selling, you can use the $250k single / $500k married Section 121 exclusion. Rarely worth it for most heirs, but it exists.

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