What every homeowner should know before selling their inherited property
Inheriting a house can be a blessing — but when it comes time to sell, you might be wondering: do I owe capital gains tax? The good news is, in most cases, heirs in Missouri pay little-to-no capital gains tax when they sell an inherited house. Here’s what you need to know.
1. What Is Capital Gains Tax on an Inherited Home?
Capital gains tax is a tax on the profit you make when you sell an asset — in this case, a house. But with inherited property, the rules are more favorable than you might expect.
When someone inherits a house, the IRS gives that property a “stepped-up basis.” That means the tax basis is reset to the home’s fair market value on the date of the original owner’s death, not what they originally paid for it.
For example:
If your loved one bought the house decades ago for $80,000, and it was worth $300,000 when they passed, your starting basis is the $300,000 value — not $80,000. If you sell soon after inheriting it, your taxable gain may be very small.
2. How Is the Tax Calculated?
Only the increase in value after you inherited the home is potentially taxable.
So if you sell the house shortly after inheritance and its value doesn’t increase much (or at all), your capital gains could be minimal or zero.
To calculate your gain:
Sale price – stepped-up basis – selling expenses = taxable gain.
If that number is $0 or negative, you owe no capital gains tax.
3. Federal vs. Missouri State Taxes
Federal Capital Gains Tax
You may owe federal capital gains tax on any profit above your stepped-up basis, depending on your overall income and tax bracket. Rates vary, but the stepped-up basis often keeps this low when selling soon after inheritance.
Missouri State Tax
As of 2025, Missouri has taken steps to eliminate or drastically reduce the capital gains tax at the state level — meaning most Missourians won’t owe state tax on the gain from selling an inherited house. However, the federal tax rules still apply.
4. What About Living in the House First?
If you choose to move into and live in the inherited house as your primary residence, you may qualify for an additional federal exclusion: up to $250,000 (single) or $500,000 (married) of capital gains can be excluded if you live in the home 2 out of the last 5 years before selling. This exclusion can further reduce or eliminate any taxable gain.
5. Tips Before You Sell
Get a professional appraisal to document the fair market value on the date of inheritance — this is your tax basis.
Keep records of any selling costs and improvements — these help reduce taxable gain.
Talk to a tax professional — everyone’s tax situation is different, and an expert can help you plan.
6. How Swift Home Buys Can Help
At Swift Home Buys, we often work with homeowners selling inherited properties in the St. Louis area — including Florissant, Clayton, Kirkwood, and beyond. Selling a probate or inherited house doesn’t need to be stressful or expensive. We can make a fair cash offer, help you navigate your timeline, and simplify the process so you get your equity without the hassle.
If you’re ready to sell your inherited house — and want to understand your tax implications — contact Swift Home Buys today. We’re here to help.