What are the tax implications of selling inherited assets?

What are the tax implications of selling inherited assets?

When you sell inherited assets, you may be subject to capital gains tax. However, the tax basis is typically stepped up to the fair market value at the time of the decedent's death.

What does 'stepped up basis' mean?

'Stepped up basis' means that the value of the asset is adjusted to its market value at the time of inheritance, which can reduce your taxable gain when you sell it.

Are there any exceptions to this rule?

Yes, there are exceptions. For example, if the asset was held in a trust or if it generates income, different rules may apply.

How do I report the sale on my tax return?

You report the sale on Schedule D of your tax return, detailing the sale price, the stepped-up basis, and any capital gains.