Question

Sale of inherited rental property - capital gains

Forum|Forum|4 years ago
April 5, 2022
1 reply
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I inherited a rental property on 2016. I paid it off in 2017 (only $25,000 was owed). I sold the property in 2021 for a net of 208,000.00. I am being hit pretty hard with capital gains. How should I be evaluating this?

Secondly, the property was in the state of Washington, there is no income tax there. But I live it Hawaii, Hawaii thinks I should pay them tax on this too?

P

PattiF

You need to make sure that you are figuring the cost basis correctly.

The cost basis for your inherited rental property is the FMV (fair market value) at the date of the decedent's death. There may be an appraisal from the estate with this. You could check sales of similar properties at the time through local realtors or on Zillow where sale prices are shown from prior years. The $25,000 that you paid will be added to the cost basis. Some costs that you paid as the seller are listed on the settlement statement that can be added to the cost basis including abstract fees, legal fees, recording fees, and transfer stamps. Using these items to calculate the cost basis when reporting the sale should reduce the capitals gains that you need to pay.

Many states also tax capital gains from other states.

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