The tax consequences when selling inherited land in Georgia can be hard to understand and untangle much of the time.
The relevant laws may seem fairly simple at first glance, but they get complicated when you factor in all the legal conditions and nuances. The short version is that if you made gains, you’ll owe taxes, and if you had a loss, you may have a tax deduction.
But then it gets complicated because whether you made a profit or had a loss also depends on when the decedent died and the use you made of the property.
What Are the Tax Consequences When Selling Land Inherited in Georgia?
Capital Gains or Losses Taxes
The tax consequences when selling inherited property in Georgia include being subject to capital gains taxes. Capital gains or losses are those that stem from the sale of items you use for personal or investment purposes, such as stocks or a house. So for income tax purposes, the sale of an inherited property in Georgia is treated as a capital gain or loss.
The catch with selling inherited land is that a gain or loss is considered a long-term gain or loss. Further, losses on personal property cannot be claimed as a tax deduction.
Reporting the Inherited Land
In some cases, the executor has to file an estate tax return to report the inherited land. But this is only if the estate exceeds the inflation-adjusted exemption amount.
The determination of the gain or loss on a land sale depends on the “basis” of the property. As the basis goes higher, the taxable gain from a sale decreases. There are, however, different rules for the sale of an inherited property that allow for a special stepped-up basis.
“Basis” Determination
The basis of the property depends largely on when it was inherited. In general, the basis is the fair market value on the date of the decedent’s death. What this means is that the capital gains taxes you owe are based on gains above the property value at the time of the decedent’s death – not what the decedent paid for the land.
Reporting Sale of the Inherited Land
Obviously, when you sell an inherited property, you have to report the sale (and gains or losses) when you file your income tax return. To calculate the gain or loss, you have to subtract the basis from what you received for the sale.
To report the gain or loss, you need to use the standard document for this purpose, the IRS Schedule D. You also have to include the gain or loss on your personal Form 1040 tax return. And make sure you use the Form 1040 (and not the Form 1040A or Form 1040EZ) for the year in which you sold the inherited house.
The tax consequences when selling land inherited in Georgia can be complex and difficult to understand at best.It’s usually a good idea to find a professional to help you navigate the tax waters.
Local Key, LLC has significant experience buying properties in Georgia focusing specifically on the Northeastern part of the state. Regardless of the situation, the professionals at Local Key can help provide options for selling your land quickly and easily. Local Key services Barrow, Hall, Gwinett, Jackson, Oconee, Walton, Banks County and the surrounding areas. Give Local Key a call and discuss your selling options – there is no obligation!
Selling real estate is typically the largest financial transaction many people will undertake. Within that, a significant amount of stress is associated with the process. The team at Local Key has over 20 years of experience helping property sellers in the North Georgia market. The company prides itself on providing honest service by discussing the various options you have to sell your land. Whether you want to sell quickly for cash or have some time to wait on a traditional listing process, reach out to Local Key to see if they are a fit for your specific situation.