Inheriting a house in Somerville, Massachusetts, can feel both like a blessing and a challenge. While real estate in Somerville is in high demand, selling inherited property comes with tax considerations and legal processes that every heir should understand—particularly when it comes to capital gains taxes and the Massachusetts probate system.
How Capital Gains Work on Inherited Property in Massachusetts
When you sell an inherited house in Somerville, you may be subject to capital gains tax. However, the IRS provides heirs with a critical tax advantage known as the step-up in basis rule.
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Step-Up in Basis: Instead of using the original purchase price of the home, your cost basis is adjusted to the fair market value of the property at the time of the decedent’s death.
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Example: If your parents purchased a home in Somerville decades ago for $80,000, and at the time of inheritance, it’s worth $900,000, your new basis is $900,000. If you sell it shortly after inheriting, your taxable capital gains may be minimal.
This step-up rule significantly reduces the tax burden for heirs who sell their inherited homes in Somerville soon after probate.
Massachusetts Estate Tax vs. Inheritance Tax
Massachusetts does not have an inheritance tax (so heirs do not pay simply because they received property). However, the state imposes a Massachusetts estate tax on estates valued over $2 million (as of the 2023–2024 thresholds). This tax is assessed against the estate before property is distributed to heirs, not directly on the individual beneficiary.
It’s important to note that while federal estate taxes apply only to estates over $13.61 million (2024 threshold), Massachusetts’ lower limit means more local estates may trigger a state estate tax.
Probate in Middlesex County: Selling an Inherited House in Somerville
If you inherit property in Somerville, the home often needs to pass through probate, unless it was held in a trust or jointly owned with rights of survivorship. Probate is the legal process of validating the will, settling debts, and transferring ownership of assets.
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In Somerville, probate cases are typically handled by the Middlesex Probate and Family Court:
Middlesex Probate and Family Court – Cambridge
208 Cambridge Street, Cambridge, MA 02141
Phone: (617) 768-5800
The executor (or personal representative) must obtain court approval before selling the inherited property. This ensures debts, liens, and taxes are addressed before proceeds are distributed to heirs.
Key Tax Considerations for Selling an Inherited Home in Somerville
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Capital Gains Taxes – Applied on the difference between the stepped-up basis and the final sale price.
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Short-Term vs. Long-Term Gains – All inherited property sales are considered long-term for tax purposes, regardless of how long you’ve owned the house. This generally means a lower tax rate.
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Primary Residence Exclusion – If you live in the inherited home for at least two years before selling, you may exclude up to $250,000 (or $500,000 for married couples) of capital gains from federal taxes.
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Deductions for Repairs & Selling Costs – Expenses related to preparing the home for sale (repairs, improvements, realtor fees, closing costs) may reduce taxable gains.
The Role of an Appraisal
An accurate professional appraisal at the time of inheritance is crucial. This establishes the fair market value (your stepped-up basis) and ensures that your capital gains are calculated correctly when you sell.
How to Reduce or Avoid Capital Gains Tax When Selling Inherited Property
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Sell shortly after inheritance to minimize gains.
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Move into the property and establish it as your primary residence to qualify for exclusions.
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Consider a 1031 exchange if converting inherited property into another investment property (consult a tax advisor for eligibility).
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Keep detailed records of improvements and selling expenses.
Disclosure and Legal Requirements in Massachusetts
Massachusetts requires sellers of real estate, including those of inherited homes, to disclose any known material defects. While Massachusetts is a “caveat emptor” (buyer beware) state, sellers are required to disclose issues such as lead paint, septic systems, and other material defects in property conditions.
Should You Work with a Cash Home Buyer in Somerville?
For heirs seeking to avoid a lengthy sales process, local cash home buyers in Somerville offer a faster, hassle-free way to sell inherited property. These buyers often purchase homes as-is, which helps you bypass repairs, showings, and potential financing delays from buyers.
Final Thoughts
Selling an inherited house in Somerville, Massachusetts, requires navigating probate, capital gains tax rules, and estate tax thresholds. The step-up in basis rule often reduces the tax burden, but Massachusetts’ estate tax can still impact your inheritance. To ensure compliance and maximize your outcome, consult with a local real estate attorney, probate lawyer, or tax professional familiar with Middlesex County laws.
If you’re considering selling your inherited property in Somerville quickly, working with an experienced local cash buyer may help simplify the process.