Planning to sell half an inherited house, Canada?
Have you received an inheritance that includes a part in a house that is also owned by others? It can be particularly perplexing if you are not the only one who has inherited a home. Does this sound too complex to you?
Inherited houses are passed down from a family member (parent or relative). An inherited property comes at a very complex time when you are already dealing with losing a dear one. The situation can be stressful. It may become very complex to deal with legal matters or to receive property shared with others of the same family. Everyone is emotionally vulnerable at the time, and there may be different opinions about keeping or selling the property. The legal aspects should not overthrow you, and you must seek out expert legal advice from a lawyer to proceed in the case.
Here are some essential aspects that you should be aware of if you do not want to keep the property. If you do not stay in the house and want to sell it, you may have to pay capital gains tax. This tax is calculated on the appreciated value of the property from the time you inherited to the time you finally sell it. Does it mean that it is better to sell even at a loss at an early date?
Primary or secondary residence
The house is transferred in the names of the inheritors. It is called the primary residence, and you will be expected to live there. There is no direct inheritance tax in Canada. There are some fees involved, like the probate fee, that the estate has to pay. But there are multiple steps of the process, and property taxes may be payable in certain cases. The fees need to be paid by the estate, even if it means you have to sell the property. The inheritors do not pay these taxes.
If you have another primary residence, then the inherited house will be treated as a vacation home, and you may have to pay taxes on that. If it is a secondary house, you may have to pay more taxes, and it is a better idea to decide to sell it, whether it is a gain or loss.
The fair market value of the property.
You will hear this term again and again while dealing with the process of selling an inherited property. The original owner bought the house years ago, and the purchase price appreciates over the years. The current price of the property based on the market rate is the base for tax calculations. The sales price does not mean that you receive that much money. There are tax implications at every stage in every state.
The cost, taxes, and fees will be calculated based on the Fair market value at the time of the family member’s death, bequeathing the property. This may mean an appreciable rate of capital gain tax may be levied. If you sell your part of the house as soon as possible, you do not even owe capital gains taxes.
Once the house is sold, you have to report the sale to authorities as this is counted as your income. Your taxes will be calculated subject to capital gain.
At the same time, loss on the sale may not mean that you have lost money. The price of the house is usually appreciated during its lifetime. The original cost price that the family member paid would appear insignificant compared to the market value now. If the property sells for less than the market value, you do not have to pay the capital gain tax and make some profit.
Now multiple scenarios may unfold.
- If the principal residence is shared by many inheritors, then they may decide and agree to sell the home at the same time.
- However, if you are forced to sell your share alone, you are free to do that.
- The others may buy it off from you or rent the property.
- You can try to sell the property share to a buyer.
Inheriting a property is a complicated matter and may need expert guidance. It becomes more complicated when you inherit a property with others and may need to sell only your part of it. It is essential to understand the significance of capital gain tax. It is subject to Fair market value and duration that you keep the property before selling it. Sometimes it is better to sell the house quickly, even at a loss, to save more money.
If you want to sell your share in an inherited house, you should consult an expert like us. You can make the most of your share without going through the hassle of renovating it for buyers. Even if the others want to retain their share and want to sell only one part of the house, we can help you. We can assess the house and promise to help you with the best prices.
We can guide you in making the maximum profits and immediately so that you can make profits even if the house is sold at a loss.
Call us today and speak to an expert in such cases.