All Things Tax

All Things Tax

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Pioneer
Posts: 2
Registered: ‎11-28-2017
Accepted Solution

Capital Gains on Inheritance

My father passed in 2016.  He left no will but he owned a house.  My sister is the personal representative and now we have recently sold the house.  What is the tax percentage in Colorado for the capital gain?  We will split the money from the sale.  But we also had to pay a Medicaid bill that took a big chunk out of what we sold the house for. Do we each pay taxes or do we pay on the amount from the sale?

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Tax Pro
Posts: 5,795
Registered: ‎02-23-2016

Re: Capital Gains on Inheritance

Hi AS01,

 

 

Welcome to the H&R Block community.

 

First, my condolences for your dad.

 

As for the house, assuming that you will split the proceeds evenly among the two of you each of you will report 50% of the gain. 

 

100% of the capital gain must be realized between you and your sister and any other siblings.  The medical expense is a separate transaction.  Think of it as the house being sold and then the medical expense being paid for by whichever of you or more than one of you with his or her part of the capital gain income.

 

If the medical expense was paid for one of you then that sibling can deduct it on Schedule A on their tax return.  If the medical expense was for the deceased then you won't be able to deduct it because in that scenario you would have to have claimed your dad as a dependent in order to deduct expenses that you paid for him.

 

Also, when figuring your capital gain, make sure you subtract your adjusted basis in the home (or the alternative appraisal amount if one was done) as well as your selling expenses from your sales price.  The remainder is your taxable gain.  If no alternative appraisal was done then your beginning (cost) basis is the same as your dad's adjusted basis was on the day of his death.  If you made any improvements to the house before selling it then the cost of those increases your basis.  A new roof is an example of an improvement.

 

The good news here is that the capital gains tax is either 0%, 15%, or 20% depending on your income level, so it may not be as much as the regular federal income tax would be.  Most taxpayers fall into the 15% category.

 

Happy holidays to you and your family and if you have any other questions I'll be glad to help.

 

 

Louis,

Senior Tax Advisor (Tampa, FL)

Pioneer
Posts: 2
Registered: ‎11-28-2017

Re: Capital Gains on Inheritance

Louis,

 

Thank you for your help!  I do have another question. 

 

Do we (my sister and I) each report our portion of the gain and pay for the capital gain tax when we individually do our taxes?  Or does she have to report the capital gain tax in full on her taxes?  Sorry I am a little confused on this.

 

Thanks,

AS01

Tax Pro
Posts: 5,795
Registered: ‎02-23-2016

Re: Capital Gains on Inheritance

Hi AS01,

 

 

No problem at all.

 

You each report your share of the gain on your individual tax returns.