What to do if you inherit a house

If you inherit a house, there are different tax implications and financial responsibilities to consider depending on what you do with the property. Here’s a look at your options and their associated costs.

Move-in
If you want to live in the inherited home, you’ll need to assume the cost of property taxes, upkeep, and insurance. You might also have to take over mortgage payments, depending on the loan terms.

If you sell the property later and it was your primary residence for at least two of the five years before the sale, you won’t need to pay capital gains tax.

Rent it
Depending on the house’s location, it can be a good source of passive income. Keep in mind the cost of landlord insurance and maintenance. Additionally, be sure to check municipal regulations for short- and long-term rentals before you make a decision.

The biggest downside to renting out your inherited property is that you’ll be subject to capital gains tax if you sell it since the property wasn’t being used as your primary residence.

Sell it
While any profit from the sale will be subject to capital gains tax, this is often the simplest course of action if the property has more than one heir. You’ll also be free from the legal and financial responsibilities of owning the property. Keep in mind the costs associated with selling a home including real estate agent fees, closing costs, and renovation expenses.

If you’re having trouble deciding what to do with your inherited property, a trusted local real estate agent can help you assess the market and determine the best course of action.