Losing a loved one and inheriting a home from them is a bittersweet experience. But the tax consequences that come with the inherited property only add to your worries.
This is why many people question themselves, “How much tax will I have to pay if I sell my house fast in New Jersey?”
The good news is that the tax regulations are pretty lax about inherited properties in New Jersey. But you need to understand that it is essential to follow these tax regulations, or they can get complicated when the legalities enter the equation.
Suppose you recently inherited a house in New Jersey. In that case, it is crucial to be aware of your tax liabilities, especially if you are thinking about selling your home fast.
Tax Liabilities Of Selling Your Inherited House In New Jersey
When you decide to sell your home fast that you inherited from a loved one, you are liable to pay the following types of taxes:
Capital Gains Tax
Most NJ locals don’t know if capital gains tax also applies to their inherited property. The answer is yes, it does.
But it is only applicable if you are successful in making a capital gain from the sale. In other words, you are only eligible for capital gains tax if you managed to sell your home fast at a higher price than the market value.
To calculate the amount of capital gains tax you might pay, start with your inherited property’s cost – this is the original price at which your loved one bought the house.
The property is usually inherited at a cost value on the day it was signed off to you. This is called a stepped-up basis as this value continues to increase after the original owner’s death.
If the house is sold for the same price as the market value, you will have no capital gains; so, you are not liable to pay capital gains tax. But if the sale price is greater, you’ll be responsible for some capital gains tax. Fortunately, the capital gains taxes are lower than income taxes.
You are only liable to pay the estate taxes if the price of your inherited house and the number of taxable gifts exceed the exemption level specified by New Jersey.
Fortunately, New Jersey imposes no estate tax on property inherited from individuals who died on or after 2018.
If these mental gymnastics are too much for you, and you need help selling your property, get in touch with EZHomeBuyers. We assure a smooth, secure, and fast sale of your inherited house in New Jersey with a cash payment in no time. Count on us for all the help you need to offload your property quickly and profitably. You do not have to worry about selling your home fast.
Determine The Cost Basis
To determine the amount of tax that you will be liable to pay, you need to calculate the cost basis. Now, the cost basis is the inherited property’s market value at the exact date of your loved one’s death.
As mentioned earlier, this figure also helps you calculate the capital gains tax.
Also, if your inherited house sells for a price lower than the market value at the time of death, you will be in loss.
Document The Sale Of The Inherited House
You need to document the sale, whether it resulted in a gain or loss. This is essential for filing your income tax return.
Now to determine the amount of gain or loss, you can deduct the cost basis from the price at which you managed to sell your home fast in New Jersey.
Then file for IRS Schedule D form and the Form 1040 tax return specific for the year in which you sold the inherited property. This is the correct way to report the gain or loss on the sale of your inherited property.
Before you decide to sell the house that you inherited, you need to learn all about your tax liabilities so that you can avoid hefty penalties.
Now, if you are still thinking, “I need to sell my house for cash,” get in touch with us at EZHomeBuyers. We can buy your inherited house regardless of its condition or the number of repairs that it needs.