Q: California - my mother plans to leave me her house (paid-off) when she dies, what taxes will I need to pay when I sell?
She's setting up her estate planning with a lawyer in Nevada where she lives.
When she passes the house to you, it gives you a stepped up basis with regard to capital gains taxes. Her tax basis was what she paid but yours will be what the value was when she died (good for you financially). So you will only be taxed on any gain from the date of her death until you sell.
Under current law there won't be any estate taxes due unless her lifetime gift and estate total is $11 million. But that number may well go down in the next few years.
A: I am a California lawyer, so I cannot address any taxes that the state of Nevada may impose. If and when you sell the home, you will have to pay capital gains taxes on the amount the house has gone up in value. If the home is your primary residence, you get a break on capital gains taxes. Your mother's estate may have to pay estate tax because, although the limit was/is $11.58 million (started under Trump) -- meaning no one needs to pay the tax unless he/she/they have assets totaling $11.58 million in value -- the limit is projected to come down to $3.5 million under Biden. In other words, while the top 2% of our country has been required to pay estate taxes over the past four years but after Biden and the new legislature address the issue, approximately 45% of the country will have to pay the tax. We won't know who has to pay the federal estate tax until the new limit is set, but experts seem to think it will be around $3.5 million. California has not imposed its own estate tax in quite some time but the current governor of California has been talking about adding it again and, if that happens in Nevada as well, it's possible your mother may have to pay two different estate taxes. I hope that helps!
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