The Tax Consequences of Selling a House After the Death of a Spouse (2024)

FAQs

What is the exclusion on a home sale after death of a spouse? ›

Surviving spouses get the full $500,000 exclusion if they sell their house within two years of the date of their spouse's death. (They must meet other ownership and use requirements as well.) A surviving spouse who sells their home within two years also may not have to pay any capital gains tax on the sale.

Community property with right of survivorship: This arrangement allows two spouses to equally share property through marriage and transfer assets to the other spouse upon death. This gives the surviving spouse the right to sell the property without going through probate.

Final Thoughts: Selling Parents House Before Death

It allows you to avoid paying taxes and frees you from being entangled in probate down the line. Selling as-is to a cash buyer is even better: you don't have to do anything with the property before selling it-- no cleaning, no repainting, less to pay in holding costs.

If you inherit property or assets, as opposed to cash, you generally don't owe taxes until you sell those assets. These capital gains taxes are then calculated using what's known as a stepped-up cost basis. This means that you pay taxes only on appreciation that occurs after you inherit the property.

You can file jointly in the year of your spouse's death (unless you remarry). However, after the year of death, you'll file as a single taxpayer, unless you are a qualifying widow(er) with a dependent child.

If he did not have a will, state statutes, known as intestacy laws, would provide who has priority to inherit the assets. In our example, if the husband had a will then the house would pass to whomever is to receive his assets pursuant to that will. That may very well be his wife, even if her name is not on the title.

In every state, but community property states, spouses are considered joint tenants with rights of survivorship (JTROS). The surviving spouse may receive a step-up in basis for half the property when their spouse dies. The other half of the increased value would be included in the deceased spouse's estate.

No, a mortgage can't remain under a deceased person's name. When the borrower passes away, the loan won't disappear. Instead, it needs to be paid. After the borrower passes, the responsibility for the mortgage payments immediately falls on the borrower's estate or heirs.

Non-natural deaths—such as a homicide or suicide—in a house can decrease the property's value by 10% to 25%, according to Randall Bell, an expert in real estate damage economics and valuation with Landmark Research Group LLC in Dana Point, California. Much of this value loss is down simply to buyer apprehension.

How do you grieve selling a house? ›

It's not easy walking away from a family home full of memories, especially if the sale marks a transition or the family is splintering off to find homes of their own. So allow yourself and other relatives the space to grieve — and know that, while painful, this can also be a chance to make new memories elsewhere.

If your mother's estate is going through probate, the executor of the estate may have more authority to determine when you need to move out. However, they will still need to give you reasonable notice. The very bottom line is that you can stay until you are evicted.

Disclaim the Inherited Property

If you don't want to deal with selling an inherited property or incurring capital gains taxes on its sale, you can choose to disclaim your inheritance or a portion of it. If you do this, there is no going back, so make sure you do not want to inherit the property before disclaiming it.

Second, capital gains taxes on accrued capital gains are forgiven if the asset holder dies—the so-called “Angel of Death” loophole.

A transfer on death (TOD) bank account is a popular estate planning tool designed to avoid probate court by naming a beneficiary. However, it doesn't avoid taxes.

Surviving spouses.

Also, you may be able to increase your exclusion amount from $250,000 to $500,000. You may take the higher exclusion if you meet all of the following conditions. You meet the 2-year ownership and residence requirements (including your late spouse's times of ownership and residence, if applicable).

In the case of a sale or exchange of property by an unmarried individual whose spouse is deceased on the date of such sale, paragraph (1) shall be applied by substituting “$500,000” for “$250,000” if such sale occurs not later than 2 years after the date of death of such spouse and the requirements of paragraph (2)(A) ...

A surviving spouse may exclude from gross income up to $500,000 of the gain from the sale or exchange of a principal residence owned jointly with a deceased spouse if the sale or exchange occurs within two years of the death of the spouse.