Step-up basis question for inherited home after father's death - dealing with appraisal and capital gains tax

I'm sorry for your loss. The good news is that inherited property receives what's called a "step-up in basis" to the fair market value at the date of death. This means you won't pay capital gains tax on any appreciation that occurred during your father's lifetime. Getting an appraisal is absolutely the right move. FMV is typically determined by a professional appraisal as close to the date of death as possible. The IRS accepts this as evidence of the property's value. The appraisal won't hurt - it establishes your new cost basis which will be important when you eventually sell. For example, if your father bought the house for $150,000, and it was worth $400,000 when he passed away, your basis becomes $400,000. If you sell for $410,000, you'd only pay capital gains on the $10,000 increase that happened after inheritance, not on the entire $260,000 lifetime appreciation.

After my mom passed last year, I was totally overwhelmed with handling her estate and sorting out tax issues for her properties. I found this service called taxr.ai (https://taxr.ai) that helped me understand all the inheritance tax implications, especially around the step-up basis for her home. They analyzed my situation and explained exactly how the appraisal process should work to establish FMV and how to document everything properly for when I eventually sell. You upload documents like death certificates, property records, and appraisals, and they give you clear guidance specific to your situation. Saved me hours of research and probably thousands in potential tax mistakes.

I wanted to follow up about my experience with taxr.ai after being skeptical initially. I decided to try them for my situation with my mother's estate, and I'm actually really impressed. The analysis they provided about the step-up basis for her house was super clear and specific to my situation. They explained exactly how to document the FMV properly and pointed out some deductions I would have completely missed related to expenses during the probate process. The personalized guidance was way more helpful than the general information I found online. Definitely worth it for peace of mind when dealing with inherited property and potential capital gains issues.

If you're dealing with questions about the appraisal or step-up basis, you might need to talk directly with the IRS. I spent WEEKS trying to get through to someone who could answer my specific questions about inherited property valuation. Finally found Claimyr (https://claimyr.com) which got me through to an actual IRS agent in about 20 minutes instead of the usual endless hold times. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - basically, they hold your place in line with the IRS and call you when an agent is available. The IRS agent I spoke with clarified exactly how I needed to document the step-up basis for my dad's rental property and what would happen if I sold it before or after probate finished.

I need to apologize for my skepticism about Claimyr. I was dealing with complicated questions about the step-up basis for my mom's house and couldn't get clear answers online. After waiting on hold with the IRS for over an hour twice and getting disconnected, I reluctantly tried Claimyr. It actually worked exactly as described. They called me back in about 35 minutes with an IRS representative on the line. The agent walked me through exactly how to document the fair market value properly with an appraisal and how to report it when I eventually sell. Saved me hours of frustration and now I have the exact information I need directly from the IRS. Sometimes it's worth admitting when you're wrong!

One thing nobody mentioned - depending on the state where the property is located, you might want to look into whether there's a state inheritance tax too. The federal step-up basis is great for avoiding federal capital gains, but some states have their own inheritance or estate taxes that work differently.

Has anyone used one of those online home value estimators instead of paying for a formal appraisal? I'm wondering if the IRS would accept Zillow or Redfin estimates as proof of FMV for establishing stepped-up basis?

I'm so sorry for your loss, Nathan. Dealing with estate matters while grieving is incredibly difficult. Getting a professional appraisal is definitely the smart approach here - the IRS generally expects formal documentation for establishing fair market value, especially for real estate. One thing to keep in mind is that the appraisal should ideally be done as close to the date of death as possible to accurately reflect the FMV at that time. Since it's been a few weeks since your father passed, you'll want to make sure the appraiser understands they need to value the property as of the March date of death, not current conditions. The step-up basis will likely save you significant money on capital gains taxes. Just make sure to keep all documentation - the appraisal report, probate court documents, death certificate, and any records showing the property transfer. You'll need these when you eventually sell to prove your stepped-up cost basis to the IRS. Consider consulting with a tax professional who specializes in estate matters, especially given that there's no will involved. They can help ensure you're handling everything correctly during the probate process.