Like the title says, from the filing process and tax questions to tax policy and reform, you can search and share All Things Tax here. This is the place to find answers to all your general questions that don't fall under the other categories. And just a reminder: questions about software or online filing should be posted in DIY Products.
11-28-2017 03:31 PM
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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11-28-2017 05:23 PM
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.
Senior Tax Advisor (Tampa, FL)
11-29-2017 03:06 PM
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.
05-10-2018 04:44 PM
On an inherited house, you only pay tax on the capital gain between the sales price and your cost basis. In the case of an inherited house, the estate of the deceased is responsible for paying any taxes owed on the capital gain between the owner's adjusted cost basis and value at the property at the time of their death. As an heir, your cost basis in the inherited property would be the value on the date the person who left it to you died. If the executor didn't determine the house's appraised value at the time the estate was distributed, it is possible to hire an appraiser to determine a historical appraised value for you to use as your basis.
Do you mean that you do not pay tax on the value of the house, just on the capital gain/loss?? Ed N.