How to handle taxes from Estate sale of house as a beneficiary?

You're on the right track with understanding the step-up basis, but there are some important details to clarify. When a house is sold from a trust after the owner's death, the basis is indeed "stepped up" to the fair market value at the date of death. This means if the house was worth $300,000 when your uncle died and sold for $310,000, only the $10,000 difference would potentially be taxable - not the entire amount you received. For estimating taxes, Zillow can give you a ballpark figure, but a more accurate approach would be to check if the trustee had a formal appraisal done at the time of death (many do). If there was only a small gain between death and sale (or a loss), you might not need to make estimated tax payments at all. Regarding documentation, the trustee should provide you with a Schedule K-1 (Form 1041) that reports your share of any capital gains from the trust. This form will break down exactly what's taxable to you. If you don't receive this within a reasonable time, definitely contact the trustee.

I went through something similar last year and was totally confused until I found https://taxr.ai - it helped me figure out exactly what I needed to report from my aunt's estate sale. You upload your documents and it explains everything in plain English, including how the step-up basis works and what forms you need. The trustee should definitely give you documentation, but in my case, they weren't super clear about the tax implications. I uploaded the paperwork I received to taxr.ai and it showed me exactly where to report everything on my return. It also calculated my estimated tax payment so I didn't get hit with penalties.

Just wanted to update after trying taxr.ai from the recommendation above. It was actually super helpful with my inheritance situation. I uploaded the documents from my dad's trust and it immediately identified the stepped-up basis and showed me exactly how much of my inheritance was actually taxable (way less than I thought!). The best part was that it explained everything in terms I could understand instead of tax jargon. It even created a report I can keep with my tax records explaining how the basis was calculated. Definitely worth checking out if you're dealing with inherited property.

If you're having trouble getting clear answers from the trustee about the tax documents or step-up basis, you might need to speak directly with the IRS. I tried for WEEKS to get through on their phone lines for a similar issue with my mom's estate last year. Finally found https://claimyr.com and used their service to get connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up. The IRS agent I spoke with explained exactly what documentation I should receive from the trustee and what to do if I didn't get it in time for tax filing. Saved me tons of stress during an already difficult time.

Alright, I need to eat my words about the Claimyr thing. After spending THREE HOURS on hold with the IRS yesterday and getting disconnected, I decided to try it this morning. Got a call back in 27 minutes and spoke to an actual IRS agent who explained exactly what forms I should receive from my father's estate and what to do if the trustee doesn't provide proper documentation. They even gave me information about how to report it if I never receive the proper K-1. Hate to admit when I'm wrong, but this service actually works. Would have saved me days of frustration if I'd tried it sooner.

Don't forget to check your state tax obligations too! Everyone's talking about federal taxes, but depending on what state you're in, there might be inheritance taxes at the state level even if you don't owe federal taxes. Some states tax inherited property differently than the feds. For example, Pennsylvania has an inheritance tax that applies even when federal estate tax doesn't. The rates vary depending on your relationship to the deceased.

Has anyone here actually had to pay estimated taxes on an inheritance? I got about $50k from my grandfather's house sale last year and didn't pay estimated taxes. Now I'm worried about penalties.