Do we owe taxes on sale of house?

Question

In or about 2003 my mother put my siblings and my name on the deed to her house along with her name.  She lived there and paid all house expenses until she passed in Dec. 2023.  My question do we owe taxes on the sale of the house?  Will the IRS say we inherited the house in 2023 or will we owe taxes on the sale of the house or will they say it was gifted to us way back in 2003.  My mother and father paid less than $20,000 in or about 1990 and we sold the house for $82,500 in Sept of 2024.  Each of the siblings received approximately $25,000.

James L. Arrasmith · Answer

Based on the details you've provided, your tax situation involves both inheritance and capital gains considerations.  
 
When your mother added you and your siblings to the deed in 2003, this was technically considered a gift, establishing your partial ownership at that time. However, since your mother continued living in the home and paying all expenses until her passing in 2023, the IRS typically treats this as your mother retaining "life estate" in the property, which means you would likely receive a stepped-up basis to the fair market value as of her death in December 2023. 
 
Given that you sold the house in September 2024 for $82,500, which was presumably close to its fair market value at the time of your mother's passing, you and your siblings would likely owe minimal to no capital gains tax on the sale. This is because the taxable gain would be calculated as the difference between the selling price ($82,500) and the stepped-up basis (fair market value at the time of your mother's death), which would be quite small given the short time frame between her passing and the sale. To ensure proper reporting and documentation, you should consult with a tax professional who can review the specific details of your situation and help you file correctly.

Q: Do we owe taxes on sale of house?