Are there capital gains taxes on inherited real estate?

How do I avoid capital gains on inherited property or real estate?

Estate taxes are fees charged by the federal government (and some state governments) against the estate of a deceased party who passes property to their heirs. The tax is based on the total value of all the property in the estate that is passed on after death. This may include the house/property they own in their name. However, only estates that are valued over a certain amount ($11.7 million in 2021) are subject to the federal estate tax. The threshold level for exemption changes every year based on the changing tax laws. If you inherit your parents’ home and it’s worth $520,000, selling it right away could help you avoid capital gains tax if it’s still only worth $520,000 at the time of the sale. According to the Utah State Tax Commission: “Utah’s estate tax system is commonly referred to as a “pick up” tax. This is because Utah picks up all, or a portion of, the credit for state death taxes allowed on the federal estate tax return (Federal form 706 or 706NA). Federal changes phased out the national inheritance tax and, therefore, eliminated Utah’s inheritance tax after December 31, 2004. Since there is no longer a federal credit for state death taxes on the federal estate tax return, there is no longer a basis for the Utah inheritance tax. Utah inheritance tax returns do not need to be filed. Utah does not require an Inheritance Tax Waiver. I HIGHLY encourage that you check with a CPA regarding taxes.

Are there inheritance taxes?

Inheritance taxes are state taxes charged against the beneficiary who receives property from a deceased person after the estate pays estate taxes (if any) and distributes property. Beneficiaries pay inheritance taxes only on the value of the property they receive. Inheritance taxes vary by state and range from 1 to 18 percent. However, just as there is an exemption threshold for estate taxes, each state has its own exemption threshold for inheritance taxes. If the value of the property you receive is less than your state’s exemption amount, you do not have to pay inheritance taxes. Again, CHECK with a CPA familiar with inheritance taxes.

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