Are you selling your inherited Los Angeles house?
Wondering if you will pay tax on that sale?
While I am not a CPA and not an attorney, here are some things to consider when selling your inherited Los Angeles house:
Start by finding the value of your house when you inherited it.
This is also known as the "stepped-up basis". This is the value of the house on the date the owner died. That value becomes the tax basis for you, the heir.
Here's an example.
A father bought a house in Los Angeles for $200,000 in 1994. He passed away in 2012 when the house was worth about $300,000. You, as the only heir, now have a "stepped-up basis" of $300,000. If you sell it for $300,000 or less, then you would owe no taxes. If you sell your Los Angeles house for anything over $300,000, then you may pay tax on that.
If you spent money fixing up the house, doing repairs, etc., then you can add that to the "stepped-up basis". In this same example, if you spent $25,000 to fix-up the house, then sold it for $325,000, you still don't pay taxes.
So, you may be wondering, how do I know what the value of the house was when my father (using same example above) passed away.
The first way to know a house's worth is to have it appraised. That's the easiest way. But say your father passed away in 2010 and you didn't have it appraised then. The IRS usually accepts the tax assessment that your county uses to determine the real estate tax. Go to the county tax assessor's office (where the house is located) and ask for a record of the tax assessments going back to the date of your father's death.
My best advice is to keep records (appraisals, receipts and paid invoices for work done on the house, tax assessment records).
I also recommend you talk to your accountant and to your attorney to make sure you know where you stand.