Avoid Capital Gains Taxes on Inherited Property in Georgia: What Most Families Need to Know

One of the most common questions we get is:

“How much capital gains taxes will I owe on an inherited property in Georgia?”

Or even better:

“How do I avoid capital gains taxes on inherited property?”

Before we jump in, I want to start with an important disclaimer. I’m not a CPA, tax attorney, or tax professional. Every family’s tax situation is different, so you should always talk with your CPA or another qualified tax professional about your specific circumstances.

That said, I can explain how this generally works in most cases—and the good news is that many families in the United States end up paying little or no capital gains taxes when they inherit real estate.

The Two Reasons Many Families Don’t Owe Capital Gains Tax

In most probate estates, the majority of the assets consist of one or more pieces of real estate.

When it comes to inherited property, there are two important concepts that often help reduce or eliminate capital gains taxes:

• Step-up in basis
• Estate and gift tax exemptions

Let’s start with the one that applies most often.

What Is a Step-Up in Basis?

The term “basis” simply refers to what you have invested in a property. It’s the starting point used to calculate capital gains.

Here’s an easy example.

Let’s say someone bought a house 40 years ago for $50,000. Today, that same property is worth $500,000.

If they sold the property while they were still living, they could potentially owe capital gains tax on much of that increase in value, depending on their individual tax situation and any available exemptions.

But when someone passes away, something important typically happens.

The Basis Steps Up to Current Market Value

When real estate is inherited, the property’s basis generally steps up to its fair market value on the date of the owner’s death.

Using the same example:

• Original purchase price: $50,000
• Value at date of death: $500,000

Instead of inheriting the original $50,000 basis, the heir generally inherits a basis of approximately $500,000.

That’s a huge difference.

How Does a Step-Up in Basis Affect Capital Gains?

Capital gains are generally calculated like this:

Sale Price − Basis = Capital Gain

If you inherit the property with a stepped-up basis of $500,000 and sell it shortly afterward for around $500,000, there may be little or no capital gain to report.

Now, if the property increases significantly in value between the date of death and the date you sell it, then that additional appreciation could potentially be subject to capital gains tax.

But in many situations, especially if the property is sold relatively soon after it’s inherited, there isn’t much appreciation during that time.

That’s one of the main reasons many families don’t end up paying capital gains tax when selling inherited property.

Need Help Finding a Probate Lawyer?

If you’re still in the probate process and don’t have an attorney, we may be able to help you.

We’ve built relationships with trusted probate attorneys in most states across the country. So if you’re looking for someone who handles probate on a regular basis, just fill out the form below, and we’ll be happy to connect you with a trusted probate attorney in your area who may be a good fit for your situation.

Don’t Forget About Estate and Gift Tax Exemptions

The second concept to understand is the estate and gift tax exemption.

As of 2023, the federal exemption exceeded $12 million.

I’m not going to dive into all the details here because this is another area where it’s important to speak with your CPA or tax professional. These rules can be complex, and everyone’s financial situation is unique.

However, between the step-up in basis and the available estate tax exemption rules, many families won’t end up paying capital gains taxes when they inherit property.

Of course, some estates are worth more than the exemption amount, and different tax rules may apply. That’s why it’s always worth getting advice specific to your situation.

Final Thoughts

Questions about capital gains taxes are some of the most common questions we hear from families going through probate.

While every situation is different, understanding concepts like the step-up in basis can help you better understand why many inherited properties don’t create the large tax bill people often expect.

Just remember: always consult your CPA or tax advisor before making any financial decisions involving inherited property.

Ready to Sell an Inherited Property?

If you’ve inherited a house and are thinking about selling it, we’d be happy to help.

We can make you a fair cash offer, or if you’d rather sell through a real estate agent, we can connect you with one of our carefully selected probate and inheritance specialists anywhere in the country.

Visit Aborviewhomebuyers.com, fill out the contact form, or give us a call. We’ll take the time to discuss your situation, explain your options, and help you determine the best path forward.