For many, inheriting a home can be a walking paradox to experience: overnight, you are left with property of sizable value you can use to improve your life while still also processing and mourning the loss of a loved one. For those who are pondering the next best move to make in this situation, understanding the tax consequences when selling an inherited property can absolutely inform your ultimate decision on how to Inheriting a property puts you in a difficult position: you’ve gained a valuable asset, yet you’re also dealing with the loss of someone important to you. Deciding what to do with the home—keep it, rent it, or sell it—can feel overwhelming. Understanding the tax implications of selling an inherited property is a good place to start, because the rules are more favorable than most people expect. Federal tax law is structured to avoid penalizing heirs, and in many cases the financial impact is far lighter than assumed.
Tax consequences when selling an inherited house in Michigan, Michigan
Tax Consequences when selling a house I inherited in Michigan, Michigan
How your tax basis is determined
Your tax “basis” is the number used to calculate potential capital gains. For inherited real estate, the law provides a “step-up” in basis. That means the property is valued at its fair market value on the date of the previous owner’s death—not the price they originally paid decades ago.
For example, if a home was purchased for $25,000 years ago and was worth $100,000 when it was inherited, the stepped-up basis becomes $100,000. This adjustment significantly reduces the gain you might owe tax on if you choose to sell.
Capital gains on an inherited property
When you sell an inherited home, any profit or loss is categorized as a capital gain or capital loss. Normally, to receive long-term capital gains treatment, you must own the property for at least a year. Inherited property is treated differently: any sale is automatically considered long-term, regardless of how long you’ve actually held the property. This typically results in lower tax rates compared to short-term gains.
Reporting the sale
Once the property is sold, you’ll need to report the transaction on your income taxes. You calculate the gain or loss by subtracting the stepped-up basis from the sale price. That figure is then reported to the IRS and your state tax authority. The process is straightforward, but accuracy matters—especially if multiple heirs are involved.
Probate and selling the property
Before an inherited home can be sold, the probate process in Michigan must run its course unless the property was held in a trust or structured to avoid probate. Once the court grants the authority to sell, all heirs with ownership interest must agree on how to proceed. After that, the sale can move forward like any other real estate transaction.
Getting help and moving forward
Managing an inherited property can feel like one more responsibility added to an already heavy situation. Selling to an experienced local buyer can simplify the process and avoid months of delays or repairs. If you want straightforward guidance on selling an inherited home in Michigan, Michigan, you can reach us at (248) 291-7783. House Full of Cash, LLC is based locally, understands the market inside and out, and can walk you through the tax considerations and sale process step by step.
Letting go of an inherited property can reduce stress and free you from ongoing maintenance and expenses. If you’re considering selling, or simply want clarity on your options, contact us anytime—we’re here to help you handle the transition with as little friction as possible.