The tax bill on an inherited house is usually far smaller than families fear — here's why.
Published · MarKey Home Buyers
The single most common tax worry we hear from heirs goes like this: “Mom bought this house for $40,000 in 1985 and it's worth $350,000 now — am I going to owe tax on $310,000 of gain?” The answer, for almost everyone, is no. Between Georgia's lack of an inheritance tax and a federal rule called the stepped-up basis, many heirs who sell owe little or nothing at all.
Georgia does not tax you for inheriting property. There is no Georgia inheritance tax and no Georgia estate tax — the state's estate tax was tied to an old federal credit that no longer exists. The federal estate tax does exist, but the exemption is $15 million per person in 2026, so it simply never touches the typical family estate. Inheriting the house itself is not a taxable event for you.
Tax on a home sale is calculated on the gain — the sale price minus your “basis” (roughly, what the property cost). When you inherit a house, federal law resets your basis to the property's fair market value on the date of death, not what the deceased originally paid. That's the “step-up.”
Back to the example: Mom paid $40,000, the house was worth $350,000 when she passed, and you inherit it. Your basis is $350,000. If you sell for $350,000, your taxable gain is zero. Decades of appreciation are wiped off the books for tax purposes. You're only ever taxed on what the house gains after the date of death — and if you sell reasonably soon, that's usually a small number.
If the house does sell for more than its date-of-death value, the gain above your stepped-up basis is taxed as a capital gain. Two pieces:
Federal. Inherited property automatically gets long-term capital gains treatment no matter how quickly you sell — you never pay the higher short-term rates. Long-term rates are 0%, 15%, or 20% depending on your income, and many sellers with a modest post-death gain land in the 0% or 15% bracket.
Georgia. The state has no separate capital gains rate; any gain is simply taxed as regular income at Georgia's flat income tax rate — 4.99% for 2026, under a law signed in May 2026.
Selling costs also reduce the gain, and if you sell to a cash buyer with no agent commissions, the math stays simple: sale price, minus basis, minus closing costs.
The step-up only helps if you can prove what the house was worth when the owner died. An appraisal dated close to the date of death is the cleanest evidence, and it's much easier to get one now than to reconstruct value years later. If the estate went through probate, valuations gathered for the court can help too. A few hundred dollars spent on an appraisal can protect you from a much larger tax argument down the road.
If you move in. Live in the inherited house as your primary residence for at least two years, and you may qualify for the federal home sale exclusion — up to $250,000 of gain tax-free ($500,000 for a married couple filing jointly) when you eventually sell.
If you rent it out or hold it. Every year you hold the house, appreciation stacks up above your stepped-up basis — and that growing slice is taxable when you sell. Heirs who know they don't want the property often sell sooner rather than later partly for this reason: close to the date of death, the taxable gain is usually near zero.
For most Georgia heirs, the tax picture is genuinely favorable: no state inheritance tax, a basis reset to current value, and long-term treatment on anything above it. The bigger costs of an inherited house tend to be the carrying costs — taxes, insurance, utilities, and upkeep on a property nobody's living in. If the plan is to sell, we buy inherited houses as-is anywhere in Georgia, with no repairs, no commissions, and a closing date that fits the estate's timeline. Selling from another state? Read about Georgia's 3% nonresident withholding in Selling an Inherited Georgia House From Out of State.
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