Inherited a house in Spokane? Your tax basis is not what your parents originally paid for it. It's called stepped-up basis, and it resets the home's value to what it was worth on the date of death, not the original purchase price. If the house was bought in 1985 for $40,000 and was worth $420,000 when you inherited it, your basis is $420,000, not $40,000. That means if you sell close to that value, you may owe little to no capital gains tax.
What Is Stepped-Up Basis?
According to IRS Publication 559, the basis of property inherited from a decedent is generally its fair market value on the date of the individual's death, not what the original owner paid for it. This is the rule most heirs don't know exists, and it's a big deal, because it means decades of appreciation that happened while your parents owned the home generally isn't something you get taxed on when you inherit it.
Why Do So Many Heirs Assume They'll Owe More Than They Actually Will?
Most heirs assume they owe tax on the full gain from the original purchase price to today's value, and that fear alone stops people from selling or makes them anxious about a number that isn't accurate. It's an understandable assumption, capital gains taxes generally do work that way for property you buy and hold yourself. Inherited property follows a different rule entirely, and not knowing that difference can lead people to delay a decision that would otherwise make sense for their family.
How Does This Affect What You Owe If You Sell?
If you sell an inherited home close to its value on the date you inherited it, your taxable gain is typically small or close to zero, since your basis is already close to the sale price. The math is simple in concept: taxable gain equals the sale price minus your basis. If your basis is $420,000 and you sell for $430,000, you're only looking at potential gain on that $10,000 difference, not on the full amount the home appreciated since 1985.
Does Washington's Community Property Law Change Anything?
Washington is a community property state, and property owned as community property between spouses can receive a full step up in basis on both halves of the property when one spouse dies, not just the deceased spouse's share. This is a meaningful difference from separate property states, where typically only the deceased owner's half receives the adjustment. If you inherited a home from a surviving parent after the first parent had already passed, how the property was titled and whether it was community property matters for figuring out the correct basis, and it's exactly the kind of detail worth confirming with a tax professional rather than assuming.
What Should You Do Before You Decide Anything?
The exact numbers depend on your specific estate, including how the property was valued at the time of death, how it was titled, and whether any special elections were made. This isn't tax advice, and it isn't meant to replace a conversation with a CPA or estate tax professional who can confirm your actual numbers. Once you have those numbers, the real estate side is where I come in.
I'm Here When You're Ready to Talk About the House
I'm Zech, a Spokane probate real estate agent. If you've inherited a home and you're trying to figure out what selling actually looks like, whether that's timing, condition, or what the local market supports, I'm here whenever you're ready. Talk to your tax professional first, then send me a message before you decide anything.
About the Author
Zech, Rios and Co Real Estate
Zech works with Spokane families through the probate process, including the real estate decisions that come after the tax and legal questions are already answered. He coordinates closely with the professionals families are already working with, rather than trying to replace them, so nothing falls through the gap between the paperwork and the sale.
Frequently Asked Questions
Do I need an appraisal to establish my basis in an inherited home? A documented fair market value at the date of death, often from a formal appraisal or the value reported on an estate tax filing, is the strongest way to support your basis if it's ever questioned. Talk to your tax professional about what documentation is appropriate for your specific estate.
What if I sell the home for less than its value on the date I inherited it? Selling below your stepped-up basis can potentially result in a deductible loss rather than a taxable gain, though specific rules apply. This is another area where confirming the details with a tax professional before selling matters.
Does stepped-up basis apply if the home was jointly owned with a sibling after inheriting it? Generally yes, each heir's share typically receives its own stepped-up basis based on the property's value at the date of death, though the specifics can vary depending on how ownership was structured. A tax professional can confirm how this applies to your situation.
This article is for general informational purposes and does not constitute tax, legal, or financial advice. The information here is based on IRS Publication 559 (2025), but individual estates vary. Consult a CPA or tax professional to confirm your specific basis and tax situation before making any decisions.
