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"“If a thing loves, it is infinite.”"
(set 2 days ago)
Location: Great Britain
27,175 posts, read 13,455,286 times
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Quote:
Originally Posted by gailjnh
The ones who will be hurt most by this (once again) are the middle and lower class people who inherit a family home. Family farms will also be hurt, particularly the older farms. Many bought those properties for a few thousand dollars and they are now worth millions do to the price of land these days. Kids work the farm with the parents and will have to sell just to pay the taxes on it.
I already told my sister and brother in law that if they are planning on leaving the house to my niece, they should add her onto the house now so she's already an owner when they die.
I'm planning on buying a house in Florida this summer and I'm going to buy it in the name of a trust with me as the trustee, my son listed as a trustee, and my sister as a trustee just in case something happens to my son. Hopefully that will avoid some of this.
I am not sure about US law however in most countries farms qualify for tax relief in relation to Inheritance Taxes. This is due to a farm being a business rather than a mere property, and the tax laws are usually different.
House market value at $300,000 at time of death. House bought for $25,000. House capital improvements are $125,000 .
House sells for $350,000.
Current Law (heir inherits stepped up cost basis at death [market value]):
Heir inherits house with a cost basis of $300,000.
Taxable gain = $350,000 - $300,000 = $50,000
One form of proposal (heir inherits decedent's cost basis at death [original cost + captital improvements]):
Heir inherits house with a cost basis of $25,000 + $125,000 = $150,000.
Taxable gain = $350,000 - $150,000 = $200,000.
Increase in taxable gain = $200,000 - $50,000 = $150,000
You’re angry because if the parents sell it on Monday they would have to pay taxes on the increased value since they bought it, but if they die Monday and their kids sell it Tuesday they shouldn’t have to pay anything?
Why? How does that make any sense? Either way its 100% gravy for the kids, and to treat death like it should just reset the value of all our assets is stupid.
Great reform measure by Joe.
And what you are saying makes no sense either. Why should the government make a profit on someone's home before his or her family does? Why should some crackhead homeless dude living on our dime reap the rewards of that house before the children, who grew up in that house and quite likely maintained it for years when the parents were too old to do it? Your stance is pure jealousy, plain and simple. You don't have, so nobody else should have.
House market value at $300,000 at time of death. House bought for $25,000. House capital improvements are $125,000 .
House sells for $350,000.
Current Law (heir inherits stepped up cost basis at death [market value]):
Heir inherits house with a cost basis of $300,000.
Taxable gain = $350,000 - $300,000 = $50,000
One form of proposal (heir inherits decedent's cost basis at death [original cost + captital improvements]):
Heir inherits house with a cost basis of $25,000 + $125,000 = $150,000.
Taxable gain = $350,000 - $150,000 = $200,000.
Increase in taxable gain = $200,000 - $50,000 = $150,000
Wow!!! I read that all wrong. lol Thanks so much. That is CRAZY!!!!!! So keeping the house until this is changed, i.e. new president is a way around this?...if, in fact this gets changed. So we'd have to pay taxes on 150,000 instead of 50,000 right?
Biden can go take his tax hikes and take a hike. Like I have always said, we will all pay higher taxes. Not a sole is exempt. Gosh, please let a new president win in 2024 and get us back to the way we were. Biden absolutely is an awful president.
The important thing to remember that there is a capital gains exclusion for the sale of your primary residence of $500,000 for a couple filing MFJ ($250,000 for single). There are a bunch of qualifications for this exclusion, but the reality is that most people never pay an tax on the sale of their primary residence.
"If you meet the conditions for a capital gains tax exemption, you can exclude up to $250,000 of gain on the sale of your main home. Certain joint returns can exclude up to $500,000 of gain. You must meet all these requirements to qualify for a capital gains tax exemption:
You must have owned the home for a period of at least two years during the five years ending on the date of the sale.
You must have used it as your main home for at least two years during the past five-year period after the sale or exchange.
You can’t have used the exclusion for any home sold or exchanged during the two-year period. This period ends on the date of the current sale or exchange."
It may be that if the decedent would have qualified for this exclusion, the exclusion passes along to the heir. Much too early to know what form, if any, this might take.
And what you are saying makes no sense either. Why should the government make a profit on someone's home before his or her family does? Why should some crackhead homeless dude living on our dime reap the rewards of that house before the children, who grew up in that house and quite likely maintained it for years when the parents were too old to do it? Your stance is pure jealousy, plain and simple. You don't have, so nobody else should have.
That’s not how this works. If you inherit a house from your parents, you get to inherit and live in it without paying taxes assuming you’re under the estate tax limit ($12 million?).
If you at some point choose to sell that property, you will have to pay taxes on all the appreciation from the time your parents bought it until you sold it. Totally logical.
That’s not how this works. If you inherit a house from your parents, you get to inherit and live in it without paying taxes assuming you’re under the estate tax limit ($12 million?).
If you at some point choose to sell that property, you will have to pay taxes on all the appreciation from the time your parents bought it until you sold it. Totally logical.
The OP stated that the house would be sold and the proceeds paid to the heirs. Also, most people do not live in their inherited properties.
Your cost basis is the value on date of death under current law.
Last edited by Lillie767; 01-31-2021 at 08:04 AM..
That’s not how this works. If you inherit a house from your parents, you get to inherit and live in it without paying taxes assuming you’re under the estate tax limit ($12 million?).
If you at some point choose to sell that property, you will have to pay taxes on all the appreciation from the time your parents bought it until you sold it. Totally logical.
Wrong.
"What are step-up taxes or the step-up tax basis?
As the recipient of an inherited property, you’ll benefit from a step-up tax basis, meaning you’ll inherit the home at the fair market value on the date of inheritance, and you’ll only be taxed on any gains between the time you inherit the home and when you sell it.
For example, let’s say the house you just inherited from your grandmother was originally purchased in 1960 for $25,000. If the house is now valued at $425,000, does that mean that when you sell the home, you’ll be taxed on a $400,000 profit? Luckily, no. You’ll only be taxed on gains during the short time period between inheritance and sale."
Got a link for this? Because your "explanation" is indecipherable.
His explanation could not be more clear. If you don't understand, do some research.
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