Inheriting a house could indeed be a blessing for any individual, more so to a family. If you have a family, having such a gift will secure the roof over your head. A saying says, “There is no better place than home,” and receiving a house can be the start of it.
Now, before we pin the frames to the wall, add new furniture to your new house, and invite new neighbors for some house warming, don’t forget about the responsibilities you inherited as well. After all, inheriting a house comes with its own set of burdens.
One burden that needs to be prioritized is the taxes. Unfortunately, owning a property, in this case, inheriting it, always goes hand-in-hand with this responsibility. That is why it is important to never neglect the taxes you need to pay off when you acknowledge your inheritance.
Is it necessary to pay these taxes?
The answer to that question today is a resounding yes, especially if you have plans to make it your residence or take ownership of it. Unless a new law is made stating otherwise, you are to oblige yourself with tax responsibilities. Be reminded that prior cases resulted in forfeiture of the property due to non-payment of the required taxes levied on the property.
Taxes will always be part of our lives. Being good citizens, we are bound by these obligations. For the case of an inherited house, consider them part of the gift you need to take care of. You can work with the state by asking for updated assessments and get the services of a tax lawyer to help you with settling these taxes.
Moving In: What You Should Do
No one in their right mind would not be delighted when hearing the news about inheriting a home. While it might take some time to process this information, you shouldn’t let your head stay in the clouds for too long. Other parties might contest the details of the will and give you a hard time during the process- all that because you were given a house.
Let us say that things went smoothly or all of the concerns mentioned above. That’s the only time where you can proceed with claiming ownership. But what exactly will you do with the property? Are you going to sell it for profits or reside in it with your family? It’s unfortunate to leave the house uninhabited.
If you decide to move-in to your newly inherited house, you must look forward to becoming a responsible homeowner. You must take care of its condition and prepare it before you fully move in. Also, do not forget the taxes attached to the property. By knowing what you need to pay, you’ll lessen the risk of forfeiting the inherited house.
Hence, here are these taxes that you should be familiar with:
Tax is assessed based on the real estate value (ad valorem) of the owned property. Some local governments use these tax proceeds to fund local utilities, law and order, and even education centers in their locality.
These taxes are paid every year, so it would be wise to check if the previous owner’s property tax payment is updated. It would be an inconvenience on your part to settle these on your own. You can seek professional help from lawyers and other tax professionals that offer assistance for these types of concerns. If you really want to move into the property, immediately settle and update the property tax.
Rates may depend on the state where the property is located. Remember, this is a yearly tax obligation, so better decide if you can live with it in the long run.
When the state where the property belongs mandates it, you must pay inheritance tax. However, not all states collect it. However, always be vigilant, so check local tax laws as well. Typically, inheritance tax ranges from 1 percent to 20 percent of the property’s net worth or the assets you have inherited.
Capital Gains Tax
If you plan to move into the inherited property, there is no need to settle this kind of tax. However, if you plan to sell the property, this should be paid. Capital Gains Tax will only collect tax on the profits you earned in selling the property and not on the property’s total value.
Inheriting a house is a big deal- one that entails a lot of responsibilities. Moreover, these responsibilities do not only revolve around maintaining and taking care of the house but also paying taxes to avoid the risk of losing it. But while inheriting a house can be difficult, it’s something that you should be grateful for. After all, it’s not every day that you get to inherit a house. Treasure it by becoming a responsible homeowner.