When you inherit a home and sell it, you pay capital gains tax based on increase the value of the home after the date of the owner’s death. For example, if you inherit your dad’s vacation cabin, and it was worth $300,000 when he died, and you later sell it for $325,000, you’ll pay tax on the $25,000 gain.
The value of the house at the time of the owner’s death is called the adjust- ed basis. If your parents purchased the cabin decades ago for $100,000, your gain isn’t based on this number. It’s calculated on the adjusted value of the property at the owner’s death.
If you sell for less than the property’s adjusted basis, you can deduct the loss up to $3,000 per year, rolling over more than that into future years.
Adjusted basis applies to all inherited assets, including jewelry, vehicles, stocks and bonds .