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How do you figure out what a house is worth for inheritance tax?

Posted on Tue Aug 11, 2015, on Probate and Estate Administration

From our “Ask a Question” Mailbag: House Appraisal for PA Inheritance Tax

Most Recently Updated July 19, 2018.

“My mother died and left us her house. We got two appraisals, which were near the value listed for real estate taxes. Then, we received a cash offer for a higher amount. Do we pay taxes on the appraisal amount, or the amount we will now sell the house for?”

How to Keep the family home in the family

House Appraisal for PA Inheritance Tax

House Appraisal for PA Inheritance Tax

You have an argument for both values, but be careful! The Pennsylvania Inheritance Tax is based on the value of the house on the date your mother died. So, you could argue that the appraised value is correct and that the house simply went up in value after her death. This would mean listing a smaller number on the Pennsylvania Inheritance Tax Return, which you would think means less tax.

Not necessarily so!

Don’t Miss Out on Reducing Taxes

If you list the smaller amount, then you miss out on two tax reducing techniques. First, if you put the sale value, you also get to deduct the costs of the sale (transfer tax, realtor commission, etc.) so the sale value may become the same as the appraised value. Second, if you use the appraised value, then the cash sale at a higher price will create a profit—capital gains—on which you will pay capital gains tax. The capital gains taxes are 18 to 20 percent federal tax and 3.07 percent Pennsylvania tax. Combined, this could be a 23.07 percent tax on the profit verses a 4.5 percent inheritance tax. Run the numbers, but you will likely find that using the cash sale value will be the more wise (tax wise) choice.

More Probate Questions?

Housing appraisals are only part of the overall probate process. By all means, if you wish to learn more, please read my more detailed article, The Probate Process All You Need to Know.

In Conclusion: House Appraisal for PA Inheritance Tax

I hope that this article was helpful in explaining how to appraise a house for inheritance taxes. Further, I included links to even more detailed information on my website. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!

Let our Probate Lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced Probate Attorneys.  By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!

Wills, Trusts, Probate, and Estate Litigation, It’s All We Do

 

Tags:

Bucks County, Inheritance, Pennsylvania, Pennsylvania Inheritance Tax rates, Probate, Probate Attorney, Probate Lawyer

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