Inheriting a home can feel like winning a prize and inheriting a project at the same time. There’s grief to process, paperwork to wrangle, and—somewhere on that to-do list—a big question:
“If I sell the house, what will the taxes really look like?”
Take a breath. Below is a clear, Georgia-savvy guide to the major tax moves that matter when you sell an inherited home in Georgia. You’ll see the rules that tend to help heirs, the potholes that trip people up, and a few smart plays to keep more dollars in your pocket.
1) The “Step-Up” in Basis: Your Quiet Superpower
The IRS generally lets heirs reset (“step up”) the property’s cost basis to its fair market value as of the decedent’s date of death (or, if the estate elects it, an alternate valuation up to six months later). Translation: instead of being stuck with Grandma’s 1998 purchase price, your “starting number” for gain/loss is the home’s value when you inherited it. That often shrinks any taxable gain when you sell. IRS+1
Quick math: If the house was worth $300,000 on the date of death and you sell it for $310,000, then pay $10,000 in agent commissions and seller costs, your “amount realized” is ~$300,000. Compare that to a $300,000 basis—no taxable gain.
Pro tip: If the executor files a federal estate return (Form 706) and elects the alternate valuation date, the estate values assets as of the sale date (within six months) or six months after death—whichever applies—but only if that election reduces both the gross estate and the estate tax. IRS
2) Long-Term by Default (Even If You Sell Fast)
A gift you didn’t expect: property you inherit is treated as a long-term capital asset regardless of how long you owned it. That means you get long-term capital-gains treatment even if you sell a few weeks after the probate wraps. IRS
3) Gains vs. Losses: What’s Taxable—and What Isn’t
- If you sell for more than your stepped-up basis (after subtracting selling costs): the difference is a long-term capital gain. You’ll report the sale on Form 8949 and Schedule D with your federal return. (Real-estate sales generally generate a Form 1099-S, which you reconcile on Form 8949.) IRS+1
- If you sell for less than your stepped-up basis and you never used the home as your personal residence: that loss is an investment (capital) loss. You can use it to offset capital gains; if your losses exceed your gains, you can generally deduct up to $3,000 against ordinary income in a year and carry the rest forward. IRS
- If you lived in the inherited home as your primary residence before selling: any loss is personal and not deductible. The IRS bars deductions for losses on the sale of a personal-use residence. IRS
4) Can You Use the $250k/$500k “Home Sale Exclusion” on an Inherited House?
Yes—but only if you make it your primary home first. The federal exclusion (up to $250,000 for single filers or $500,000 for married filing jointly) requires that you own and use the home as your principal residence for 2 of the 5 years before the sale. Time the decedent lived there doesn’t count for your use test. Many heirs choose to move in, satisfy the 2-year test, and then sell.
Important caveat: If you rent the home before selling, any depreciation you claimed is “recaptured” and can’t be sheltered by the home-sale exclusion. You’ll pay up to 25% on that recapture portion even if you qualify for §121.
5) Georgia-Specific Taxes to Remember
- No inheritance tax in Georgia. You won’t owe a state inheritance tax, and Georgia’s old estate “pick-up” tax is long gone. Department of Revenue
- But Georgia does tax your capital gain as regular income. Any federal long-term gain you recognize flows into your Georgia return and is taxed at Georgia’s individual income tax rate (Georgia doesn’t have a special capital-gains rate). As of 2025, Georgia is transitioning to a flat rate (5.19% for 2025), with future adjustments scheduled—check the latest rate when you file. Department of Revenue+1
6) Don’t Forget These Paperwork + “Gotchas”
- Form 8949 + Schedule D are the usual federal reporting combo for the sale of inherited real estate. Many sellers will also see a Form 1099-S from the closing attorney or title company. IRS+1
- Basis consistency rules. For estates required to file Form 706, the estate must furnish Form 8971 to beneficiaries; your reported basis must be consistent with what the estate reported. IRS
- NIIT (3.8% Net Investment Income Tax). High-income filers may owe the 3.8% NIIT on some or all of their capital gains from the sale. If your modified AGI exceeds the IRS thresholds, this surtax can apply on top of regular capital-gains tax. IRS
7) Strategic Moves Before You List
- Document the date-of-death value. An appraisal tied to the decedent’s date of death (or the alternate valuation date, if elected by the estate) anchors your step-up and can save you real money at tax time. IRS
- Track selling costs. Commissions, transfer tax, attorney/title fees, and staging can reduce your gain. Keep invoices and your closing disclosure. (They reduce the “amount realized” you report.) IRS
- Decide on use early. If you’re leaning toward moving in to capture the §121 exclusion, map out a realistic 24-month plan. If you’d rather sell quickly and skip repairs, a direct cash sale can spare you months of carrying costs.
Fast, As-Is Option (When Time and Certainty Matter)
If you’re staring down probate timelines, repairs, or a cross-country commute to handle an empty house, selling as-is for cash can be the least stressful path. At Middle Georgia Cash Homes (Middle Georgia Cash Homes LLC), we buy inherited houses in any condition across Georgia and surrounding Georgia markets—no showings, no repairs, we cover standard closing costs, and we can close on your timeline. We’ll also walk you through the numbers side-by-side with a traditional listing so you can choose what nets you more.
Curious what your Georgia inheritance could sell for—without the hassle? Call us at 478-216-1795 or reach out through our Sellers site anytime.
Friendly (but important) disclaimer
This article is for general education—not legal or tax advice. Tax rules change, and your facts matter (estate size, elections made by the executor, whether you lived in or rented the home, etc.). Always confirm your numbers with a Georgia-savvy CPA or estate attorney before you sell. For current IRS rules, see the official guidance we cited above. Department of Revenue+7IRS+7IRS+7