How to Sell Inherited House Denver Colorado
Quick message from Shaun.
If this inheritance is the result of a lost loved one we send our kindness and thoughts. I myself have lost several family members and it is never easy. I like to think of an inheritance as an opportunity to remember your loved one, be thankful for their gift, and use it to create new memories of them.
My deepest sympathies.
Shaun Martin – Owner of Watson Buys.
Your Updated Guide To Selling Inherited Property In Denver, Colorado
We have researched current rules, laws, and trends for Denver and all of Colorado as they pertain to selling an inherited property. If you have any questions be sure to email or call us.
Of course, if you are interested in discussing a property you inherited you have the option to fill out the form too. This way we can do a little research on the house before we reach out.
Introduction to selling a house that you inherited in Denver, CO
DENVER, COLORADO: AS you probably understand there is a set of rules that must be followed when selling a house that you inherited. These rules include:
- Tax rules for inherited property:
- Taxes that must be paid when you sell
- Rules around capital gains and how you might defer them
- 1031 exchange tax deferral program
- Cost basis, depreciation and other tax ramifications
- Laws around selling real estate that was inherited:
- Including selling partial ownership
- selling to a sibling or family member
- at what stage an inheritance can be sold in probate
- Emotional and family rules
- Do your family members want to sell
- Maybe you could turn the inheritance into a rental
- Siblings that want to renovate then sell.
Selling Inherited Property is then further complicated by local and state law. Denver and Colorado will have a set of laws around probate and dispersion of the property that will be different from other states.
This guide on How to Sell Inherited House Denver Colorado will answer the general rules and regulations around the inherited property and get down to very specific answers.
If you have inherited a house, regardless of the situation, this resource is here for you and your family.
Table of Contents
Tax Rules for Selling Inherited Property in Denver and Colorado
What are the IRS rules for an inherited property?
Is there a local Denver City tax also?
How does the state of Colorado treat my inheritance when it comes to taxes?
Let’s answer these tax implication questions right now.
What is inheritance tax?
Inheritance tax is a state tax (in our case imposed by Colorado) on a property you inherited from someone who died. Some states do impose taxes on inherited property and some do not. Inheritance tax is paid for by the person who inherited the property. Inheritance tax is paid at the time the property is inherited. Inheritance tax is different that capital gains tax which can be applied when you sell the house you inherited.
We discuss this shortly.
In the state of Colorado, there is NO INHERITANCE TAX.
That said if you live in another state and inherit a house in Colorado your home state may still require you to pay taxes.
You can check out your state’s tax requirements here.
On a federal level Inheritance tax is referred to as Estate Tax. Estate tax is not normally a consideration in most cases. This is because most estates/inheritances that are gifted do not exceed a certain threshold. Currently the inheritance must exceed $11,700,000 to require the benefactor to file for estate taxes. Yes you read that right… almost 12 MILLION DOLLARS!
Do I have to pay inheritance tax on real estate?
In most situations, you will not have to pay inheritance tax. The IRS refers to inheritance tax as the estate tax.
Estate taxes will be paid if the value of the inheritance is greater than $11,700,000.
For this reason, the answer is most people will never have to pay inheritance OR estate tax.
What is capital gains tax for inheritance purposes?
When it comes to real estate capital gains tax is a tax that is applied to the house when you sell it.
Capital gains is worked out by taking the amount you sell the house for and subtracting it from the tax “basis”
The basis is the cost you paid for the house plus any improvements you have made over the years such as a new roof or furnace.
FOR EXAMPLE: You buy a house for $100,000. You put a new roof on it, maybe replace the siding also. This costs you $20,000.
Therefore you basis is $120,000.
Now when you sell the house you get $150,000.
So this is the math…
$150,000 (sold price) – $120,000 (basis) = $30,000.
So you will pay capital gains of $30,000.
All properties that are inherited are subject to inheritance tax. Most will not be valuable enough to be a concern. Inherited properties are only taxed using capital gains when the house is sold.
We discuss this in more detail shortly.
When must tax consequences be paid for Inherited Real Estate?
In Colorado taxes on inherited property are “assessed” at the time you inherit it. This means when you inherit the house the IRS will look at how much it is worth. If the “estate” you inherit is great than $11,700,000 then you will be required to pay taxes on it that year.
In Denver, and in fact the entire country, capitial gains tax is only applied when the inherited house is sold.
Can I delay paying taxes on a house that I inherited?
Yes you can. According to the IRS you are never allowed to “avoid” paying taxes however when selling an inherited property you can “delay” paying capital gains on it by using something called a 1031 exchange.
The team at Watson Buys has been involved in many 1031 exchanges.
How a 1031 exchange works is:
- You find an official 3rd party company to perform the 1031 exchange (you are never allowed to do this without one).
- When you sell the house the money from the sale is transferred directly to the 1031 company.
- Now you must find another house to buy.
- When you find the new house it can be bought using the money from the sale of the inherited property.
- At no time are you allowed to be in possession of the money.
- The exchange must be from like to like – this means if you sell a house (real property) then you must buy a house (real property).
Professional house buyers, like Watson Buys, use the 1031 exchange to help them buy properties after selling a previous house for a profit.
There are rules around the type of property that can use a 1031 exchange. For example, a fix and flip property does not truly qualify according to the IRS guidelines for a 1031 exchange.
How is capital gains determined on Inherited real estate
Capital gains tax is calculated using the “Stepped-Up Basis” Tax Rule.
How the “Stepped-Up Basis” Tax rule works for inherited Property.
The current market value of the house is determined on the day the previous owner passes away. This becomes the new basis for the house.
The basis is “stepped-up” from what the previous owner paid for it to the current market value.
This means if the new owner chooses to sell it they do not have to pay a hefty tax bill.
FOR EXAMPLE: Let’s say I inherited a house from my mom. My mom paid $50,000 for it 30 years ago.
The day she dies the fair market value of the home is $300,000.
$300,000 is the new basis. If i sold the house for $300,000 I would not have to pay any capital gains tax.
Now for argument’s sake let’s say my mom didn’t day and she decided to sell the house. i.e I didn’t inherit the house she just sold it because she wanted to move. Now because the house wasn’t inherited the “Stepped-Up” Tax Ruel does not apply.
Her capital gains tax would look like this.
SOLD $300,000 – BASIS $50,000 = $250,000.
In this scenario, my mom would be taxed on the $250,000.
Can you see the difference?
How To Sell Inherited Property in Poor Condition
It is not uncommon for an inherited property to be in poor condition. Maybe the roof needs replacing or the furnace is dead. The bathrooms and kitchens may be old and requiring renovation to sell on the open market.
Of course, if you choose to sell it as-is you will have to reduce the price to make it worth it for the buyer.
Many “Normal” buyers and homeowners will not be interested in buying a run-down house. They are looking for move-in ready.
So who will buy inherited property in bad shape?
There are professional real estate investors who are looking for just that situation. Watson Buys is one of those companies.
We specialize in buying inherited property in Denver and the greater Colorado region. We like to buy inheritances because then we can use our team of experts to remodel them and either rent them out or sell them.
Because we are real estate professionals we know how to make the house nice for a reasonable price.
However, when you sell to us you need to understand there needs to be a little profit built-in for us, some “meat on the bone” as they say.
We're a local company ready to buy today
With 2 Denver locations, we understand both the real estate trend, Denver regulations and Colorado law around buying inherited property.
As specialists, we make selling your inheritance simple and easy.
Watson Buys – We Buy Houses in Denver
16506 W 14th Place, Golden, CO 80401
Watson Buys – Sell My House Fast in Denver
12915 Pensacola Pl, Denver, CO 80239
Email: [email protected]
We can buy your Inherited House in Denver 24 hours a day 7 days a week
How to Sell My Share of the Inheritance to Sibling or and Member of the Family
Family, brothers, sisters uncles, and aunts. We love em right?
But when it comes to difficult decisions like what to do with inherited property it can seem overwhelming. Maybe the property sat abandoned and is now run down. However…
Your brother thinks the house should be renovated and sold for top dollar OR…
Your aunt believes turning the inheritance into a rental is the way to go.
Both are great options but can cost a lot of time and money. So what can you do? Maybe you sell your share of the inheritance to your family member? Is that even allowed?
IRS has a way to pass your inheritance to your brother, sister, or another family member.
Selling your inheritance to a member of your family is no different than selling it to anyone else.
How does Watson Buys Purchase Inherited Property?
We’ll discuss the condition of the house, what your goals are, and answer any questions you have about selling inherited real estate in Colorado.
To work out the value we will look at what other houses have sold for in the same condition.
Finally if we are in the same ball park on price we will email you an offer. You can take this away and look at it. Discuss with family members etc.
Watson Buys specializes in buying property in Denver, Colorado that has been inherited. If you have any questions or just want to no more you can fill out a form or call us.
We are here to help you.
What is the difference between inheritance tax and capital gains tax for inherited property?
Inheritance Tax or Estate Tax is a tax that you pay on something you inherited if the amount of the inheritance is greater than $11,700,000 at the time of writing this. You can see up to date IRS Estate Tax here.
Inheritance Tax is paid at the time that you inherit the property (or at least is applied in the current tax year).
Capital Gains Tax is a tax that is applied when an inheritance is sold (at the time you sell it). If you sell the house and make a profit on the house then you are taxed on that profit. This profit is treated as income by the IRS.
The amount of capital gains you pay on the inheritance is calculated using the “Stepped-Up Basis” Tax Rule.
The Stepped-Up Basis Tax Rule works like this. The day the previous owner dies the IRS calculates the Fair Market Value of the House. This is now called the “basis” (for tax purposes).
To determine the profit when you sell you take the price you sold the house for and subtract the “basis”. The difference is your profit. The profit is the amount you will be taxed on.
For example: Jenn inherits a house from her father George. The day George passed away the current market value of the house was $200,000. Jenn sells the house for $210,000 a few months after inheriting it.
To work out how much her taxable gain is:
$210,000 – $200,000 = $10,000
Therefore Jenn will have to pay capital gains tax on $10,000. The other $200,000 is paid to her free of tax.
Inherited Property Law for Denver, Colorado and USA
Can Bankruptcy Stop Foreclosure in Colorado?
Will Chapter 7 bankruptcy help me stop foreclosure?
Foreclosure and Chapter 7 are often in the same discussion. It is a very complicated and detailed process that we will answer in the future.
In short, there are instances when Chapter 7 will stop foreclosure. One problem many homeowners face is that they have to pay the fees up front.
Chapter 7 is often the better route if you can afford to pay for it.
How does Chapter 13 Bankruptcy stop foreclosure?
Chapter 13 Bankruptcy can also stop foreclosure proceedings.
If you are considering filing for bankruptcy to stop foreclosure I highly recommend you speak with someone you trust.
I would also run any information by a help group to ensure you are being given all options.
Chapter 13 is an extensive process that most people end up failing on and having to start again. This leaves them right back where they started and in no better position.
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