If you have recently inherited a property in Michigan and are considering selling it, understanding the tax implications is crucial. The good news is that inherited properties receive favorable tax treatment in many cases, but there are still important details you need to know to make informed decisions. While this is general information and not tax advice, it can help you understand the landscape before you consult with a tax professional.
Understanding the Stepped-Up Basis
One of the most significant tax benefits of inheriting a property is the stepped-up basis. This means that for tax purposes, your cost basis in the property is not what the original owner paid for it — it is the fair market value on the date of their death. For example, if your parents purchased a home for $50,000 decades ago and it was worth $200,000 when they passed away, your tax basis would be $200,000. If you sell it for $200,000, you would owe no capital gains tax.
When Capital Gains Tax Applies
Capital gains tax only applies to the difference between your stepped-up basis and the sale price. If the property has appreciated since the date of death, or if you have made improvements that increased its value, you may owe capital gains tax on that difference. The longer you hold the inherited property, the more it may appreciate, which could increase your tax liability. This is one reason many heirs choose to sell quickly.
Michigan Property Tax Considerations
In Michigan, the transfer of property due to inheritance can trigger an uncapping of the taxable value, which means your property taxes could increase significantly. If the deceased homeowner had a principal residence exemption and the heir does not plan to live in the home, the property tax bill could jump by thousands of dollars per year. This is another reason to consider selling sooner rather than later.
Why Selling Fast Can Save You Money
Every month you hold an inherited property, you are paying property taxes, insurance, utilities, and potentially a mortgage. These carrying costs add up quickly. Selling to Offer Now Michigan for cash means you can close in as little as seven days, minimizing your carrying costs and potential capital gains exposure. We handle everything — you just collect your cash at closing.
Talk to Us About Your Inherited Property
We strongly recommend consulting with a tax professional or CPA before selling an inherited property. But if you want to understand what your home is worth in its current condition, Offer Now Michigan can provide a free, no-obligation cash offer. Call us at 810-425-5961 today.