Questions about tax implications when selling my mom's house with power of attorney

This is really helpful, thank you. Just to clarify - if there's leftover money after paying off the mortgage, I shouldn't just put it in my account even with the POA? Is there a better way to handle this? Also, my mom bought the house for about $145k in 2001 and we're selling for around $320k. Would she owe capital gains on all of that difference?

You should keep the proceeds in an account that's still legally your mother's, just managed by you under the POA. Many people set up a separate account specifically for managing funds under a POA to keep clear records. Mixing her assets with yours could potentially create legal issues. Regarding capital gains, based on those numbers, there's a $175k gain, which is well under the $250k exclusion assuming this was her primary residence for 2 of the last 5 years. So she likely wouldn't owe any capital gains tax on this sale. However, you should document all major improvements made to the house over the years as these increase the basis and further reduce any potential taxable gain.

Does the taxr.ai thing handle all the step-up basis calculations? My situation is similar but my mom inherited her house from my grandparents in 2015, and I'm unclear if that resets the basis amount for calculating capital gains.

I'm a little hesitant about uploading financial documents to online services. How secure is it? And how accurate is the information compared to what an accountant might tell you?

It absolutely handles step-up basis calculations. For inherited properties, the basis generally becomes the fair market value at the date of death, which can significantly reduce capital gains. The tool specifically asked for inheritance information and adjusted the basis calculation accordingly. They use bank-level encryption for all document uploads, and everything is deleted after analysis if you choose that option. As for accuracy, I actually had my accountant review the results, and he was impressed. It covers the same tax code information but applies it directly to your documents rather than giving generic advice.

Wait, how does this actually work? I've been trying to talk to someone at the IRS about a similar situation for weeks. Does it just bypass the phone queue somehow?

Sorry but this sounds too good to be true. The IRS wait times are insane by design. I've waited 3+ hours multiple times. There's no way some service can magically get you through when millions of others are waiting.

It works by continually calling the IRS number and navigating through all the automated menus for you until it connects with a human agent. Once it gets a live person, it calls you and connects you directly. No more waiting on hold for hours or dealing with getting disconnected and starting over. They use automated technology to handle the frustrating part of the call process, not to skip the line. Everyone still waits their turn, but their system does the waiting for you instead of you having to sit with a phone to your ear for hours. It's completely legitimate and really just saves you from the tedious part of getting IRS help.

I hadn't even thought about the Medicaid implications. That's a really important point since she might need that level of care eventually. Is there a way to use the proceeds for her benefit that wouldn't trigger Medicaid issues while still meeting her needs?

You should use the proceeds only for your mom's benefit and keep meticulous records of every expenditure. Maintaining a separate account specifically for her funds managed under the POA is essential. This money can be used for her care, living expenses, medical costs not covered by insurance, and quality of life improvements. For Medicaid planning, some families work with elder law attorneys to establish properly structured trusts, but you need professional guidance specific to your state as the rules vary. The key is demonstrating that funds were used for her benefit rather than gifted away to avoid Medicaid spend-down requirements.

This is so important! My parents sold their house last year and we forgot to account for the $30k kitchen renovation they did in 2010. Would have lost out on that adjustment to the basis if the closing agent hadn't mentioned it. Old credit card statements can help prove these expenses if you don't have the receipts anymore.