Is the home the next family heirloom?
Posted On December 26, 2019
If you’ve shopped for a home recently or currently work in real estate, you know fewer and fewer Americans are moving, for a number of reasons. In 1990, approximately 7.7% of homeowners moved over the course of the year, by 2016 that figure declined to just 4.2%. In 2017, Zillow reported 86% of all American homeowners who have owned their home for one year or more were not interested in moving in the next three years.
According to Zillow, the top reasons Americans aren’t moving are:
Will homes become the new family heirloom? Approximately 14 million homeowners think so. What do you do if you inherit a house? You have three main options, you can move into the home and live there, you can turn it into a rental and earn income, or you can sell it for a profit. Your choice may depend on the mortgage status of the property and the number of stakeholders.
What you do with the home may depend on the mortgage status, especially if you currently have a mortgage of your own?
If you plan to live in the home yourself or keep it as an investment property, you will not be immediately liable for taxes. You’ll have to pay property taxes or other state and local taxes if you occupy or rent the property. If you choose to sell the property, you will have to pay capital gains taxes. However, the home will be taxed on any gains between the time you inherit the home and the time you sell it. So, don’t worry if your grandmother purchased her home for only $25,000, you won’t be taxed on decades of appreciation.
You may inherit a home with multiple stakeholders, like your siblings or cousins inheriting a home from parents or grandparents. When multiple stakeholders are involved, you’ll have to agree on how to split the property.
When you inherit a home, the financial impact and tax liability depends on how you plan to use the home. If you move in, you’ll be responsible for any existing mortgage, maintenance, or other costs related to ownership. You won’t be liable for taxes right away but will have to pay annual property taxes like with any other home. If you keep the home and rent it, you’ll be responsible for any maintenance and property management costs, and the mortgage if there is one. You’ll also have to pay property taxes, but you can deduct expenses related to maintenance and property upkeep, since it’s a rental property. If you sell the home, you’ll have to cover any needed repairs before the sale and any real estate agent fees. Depending on how much you profit from the sale, you’ll also have to pay capital gains taxes.
If you’ve inherited a property and have any questions about it, please let me know.