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    IRC §1014 · IRC §1223(9) · IRS Pub 551

    Inherited House Sale Calculator

    Your basis is the fair market value on the date of death, not what the decedent paid (a surviving spouse who owned the home jointly outside a community-property state gets that only for the late spouse's half). Sales are automatically long-term. Most heirs owe far less than they fear — often nothing.

    Updated Reviewed for TY 2025 & 2026
    Federal only · state rules vary

    Get a retroactive appraisal if none exists — a defensible number, not a guess.

    The deduction defaults to the 2026 standard deduction for your filing status ($16,100); enter your itemized or larger total instead. The 3.8% NIIT uses your AGI plus the taxable gain as MAGI.

    Makes a loss NONdeductible if it was still your home when you sold. Converted it to a rental before selling? Say so below: only the drop after the conversion is deductible.

    Default on for high earners.

    §121 home-sale exclusion

    Applies if you (or, for a surviving spouse, you and your late spouse) owned and lived in the home 2 of the 5 years before the sale. Inheriting alone doesn't count.

    Not remarried. Your spouse's ownership and use count as yours.

    Time you lived there before you inherited counts toward the use test; ownership starts at the death.

    Bars the exclusion for this sale (§121(b)(3)).

    Allows a partial exclusion under 24 months (Reg. §1.121-3).

    TY 2026
    Long-term capital gain
    Always long-term (§1223(9))
    Stepped-up basis (FMV at death)$400,000
    + post-death improvements$0
    Adjusted basis$400,000
    Amount realized (sale − costs)$423,000
    Long-term capital gain$23,000
    LTCG tax (15% top rate)$3,450
    Total federal tax$3,450
    Net after-tax proceeds$419,550

    Why is my tax so low?

    Because your basis reset to the FMV on the date of death (IRC §1014). What your parent paid decades ago never enters this math. If you sell near that FMV, your gain is close to zero — and it's already long-term, so it can never be short-term ordinary income.

    Notes

    • Your basis is the FMV on the date of death (IRC §1014). What the decedent originally paid is IRRELEVANT.
    • Holding period is automatically LONG-TERM regardless of how quickly you sell (IRC §1223(9)).
    • No §121 exclusion: inheriting a home does not satisfy the 2-of-5-year ownership and use test on its own. If you move in and use it as your main home for 2 years before selling, the exclusion can apply (up to $250,000; $500,000 for a surviving spouse within 2 years of the death).
    • Co-owned the home with the person who died but weren't their spouse (for example, a child on the deed)? Only the part included in their estate steps up, generally in proportion to what each of you paid (IRC §2040(a)); your own contributed share keeps its basis. This calculator assumes you inherited the whole home.
    • Federal only — some states impose their own inheritance/estate tax.
    • Estate tax is a separate question (basic exclusion $13.99M for 2025 deaths, $15M for 2026 deaths) — see the estate tax calculator.
    • The estate may elect the alternate valuation date (§2032, 6 months after death) — only estates that owe estate tax can elect it, and property sold or distributed within the 6 months is valued on that date. That's an estate-level election that changes the FMV you enter.
    • This calculator assumes a step-up. If you gave the home to the decedent within a year before death and inherited it back, your basis is their adjusted basis instead (§1014(e)).
    • Lived in it, then converted it to a rental and sold it as a rental? A loss can be deductible, but only the decline after the conversion, measured from the lower of your adjusted basis or the fair market value on the conversion date (IRS Pub 544, Pub 551). Turn on ‘Converted it to a rental before selling’ to model it; depreciation taken after the conversion isn't modeled.

    Related

    Sources & References

    Primary references used for this content

    Publication 551

    Basis of Assets

    Inherited property basis = FMV on date of death.

    View on irs.gov

    IRC §1014

    26 U.S.C. §1014 — Basis of property acquired from a decedent

    The statute establishing the stepped-up basis.

    View on law.cornell.edu

    IRC §1223(9)

    26 U.S.C. §1223 — Holding period of property

    Automatic long-term treatment for inherited property.

    View on law.cornell.edu

    Publication 523

    Selling Your Home

    §121 applies if you (or, for a surviving spouse, you and your late spouse) owned and lived in the home 2 of the 5 years before the sale.

    View on irs.gov

    Topic 703

    Basis of Assets

    IRS plain-language overview of basis rules.

    View on irs.gov

    ✓5 primary sources; links re-checked on a weekly rotation by the source watcher

    Disclaimer: This calculator provides estimates for educational purposes only. Not tax, legal, or financial advice. Results may vary based on your specific circumstances. Consult a qualified CPA or tax professional for personalized guidance.