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Title: How to Reduce or Avoid Capital Gains Tax on Inherited Property

United States, 3rd Mar 2025 - Inheriting property can be both a valuable asset and a potential tax burden. One of the primary financial concerns heirs face is capital gains tax, which applies when inherited property is sold for a profit. However, with strategic planning, you can significantly reduce or even eliminate this tax liability.At ALTA Estate, we specialize in estate planning and tax strategies, ensuring you keep more of your inheritance while complying with tax laws. Here are some effective ways to minimize or avoid capital gains tax on inherited property.1. Leverage the Step-Up in Basis RuleOne of the most powerful tax-saving benefits when inheriting property is the step-up in basis rule. This rule allows the property’s value to be “reset” to its fair market value at the time of the original owner’s death.How It Works: Instead of inheriting the property at its original purchase price (which may have been much lower), the step-up in basis adjusts the value to the date of the decedent’s passing.Tax Benefit: If you sell the property shortly after inheriting it, your taxable gain may be minimal or nonexistent, as the sale price will likely be close to the adjusted basis.This rule provides significant tax relief for heirs, making it a key consideration when handling inherited assets.2. Qualify for the Primary Residence ExemptionIf you move into the inherited property and use it as your primary residence, you may be eligible for the capital gains tax exclusion when selling it later.Exemption Amount: You can exclude up to $250,000 of capital gains if you are single, or $500,000 if married, when selling your primary home.Residency Requirement: You must live in the home for at least two of the five years before selling to qualify.This strategy is ideal for heirs who pl...

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