Is money from selling inherited property considered income or inheritance? How to report on 2024 taxes?

This is actually a pretty common situation. What you received isn't considered regular income or a direct inheritance - it's proceeds from the sale of inherited property, which has special tax treatment. Here's how it works: When you inherited your portion of the house, you received what's called a "stepped-up basis" to the fair market value at the time of your father's death ($285,000 total, with your share being $95,000). When you sold your portion to your brother for $95,000, there was no gain or loss since your basis and sale price were essentially the same. You'll need to report the sale on Schedule D and Form 8949 of your tax return, but you'll likely have zero gain to be taxed on. The 1099-S is just reporting that the transaction occurred, not that you necessarily owe taxes. Make sure you indicate on the forms that this was inherited property and include the date of inheritance and date of sale.

I went through something similar last year with my mom's house and was totally confused by all the paperwork. I found this service called taxr.ai (https://taxr.ai) that helped me understand exactly what I needed to do with the 1099-S and inheritance stuff. I uploaded the 1099-S and some other documents I had, and it analyzed everything and explained exactly how to report it on my taxes. It also confirmed what the previous commenter said about the stepped-up basis, but gave me specific instructions for my situation. I was worried about messing up my taxes and potentially getting audited, but this really helped clear things up.

Just wanted to follow up - I decided to try out taxr.ai after my last comment. After uploading my 1099-S and answering a few questions about my grandmother's property, it broke down exactly how to handle everything! It confirmed I had a stepped-up basis and showed me precisely how to report the sale on Schedule D with zero gain. The service even explained that I needed to check the box indicating it was inherited property and provided the exact codes to use. Honestly saved me hours of research and worry. Going to finish my return this weekend now that I actually understand what I'm doing!

If you need to ask the IRS specific questions about your inheritance situation, good luck getting through to anyone. I spent WEEKS trying to reach someone at the IRS about a similar inheritance issue last year. Finally found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under an hour. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to explain my whole inheritance situation and get official clarification. The agent confirmed exactly what others have said here about how inheritance and stepped-up basis works, but it was reassuring to hear it directly from the IRS instead of just hoping I was doing it right.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself because I've been trying to reach the IRS about an inheritance issue similar to the original poster's situation. I was SHOCKED when I got a call back in about 45 minutes with an actual IRS representative on the line. I explained my inheritance situation, and they confirmed all the details about stepped-up basis and how to report it properly on Schedule D. They even gave me some additional tips about making sure I document the date of death value properly. For anyone dealing with inheritance tax questions, being able to actually speak with the IRS directly is incredibly reassuring. I'm still surprised this actually worked after spending weeks trying to get through on my own.

Don't forget to check if your state has inheritance taxes! Federal tax might be zero with the stepped-up basis, but some states have separate inheritance tax requirements. I got hit with a surprise state inheritance tax bill when I sold my portion of my parent's property to my sister.

My tax person told me that for 2024, the rules are different if the total estate was over $13.61 million. Was your dad's estate really big beyond just the house? If it was over that amount, there might be estate taxes to consider, but most people don't hit that threshold.

Just want to add one important detail that might help - make sure you keep good records of the property appraisal that was done after your dad's death. That appraisal establishing the $285,000 value is what determines your stepped-up basis, and you'll want to have that documentation if the IRS ever questions your return. Also, since you mentioned this happened "last year," make sure the date of death and date of sale are both clearly documented on your Schedule D. The IRS likes to see that timeline to confirm you're handling inherited property correctly. If there was any time gap between when your dad passed and when the appraisal was done, you might want to note that as well. Sounds like you're on the right track with reporting zero gain - just make sure your paperwork is solid to back it up!