More than 340,000 homes changed hands through inheritance across the U.S. in the past year alone, accounting for roughly 7.4% of all real estate transactions, and that surge is showing up clearly here in Orlando, Florida.
From our experience, families dealing with selling inherited property in Orland, FL often face a mix of paperwork, timing pressure, and uncertainty around taxes and the legal process.
This guide explains what happens after an inherited property passes to new owners, how the probate process works in Florida, and what to expect when selling an inherited house in today’s market.
It also connects directly to our deeper resource on sell my inherited house, so readers can determine next steps with confidence and clarity in the local real estate landscape.
Short Summary
- The probate process is the court-supervised method to legally transfer inherited property to heirs.
- Florida has no state inheritance tax, and the stepped-up basis often minimizes federal capital gains taxes.
- Selling near the time of inheritance typically results in the lowest tax implications.
- Working with local professionals like a real estate attorney and tax professional is highly recommended.
- Selling to a cash buyer is a viable option to settle an estate quickly and as-is.
Navigating the Florida Probate Process and Ownership
Before you can sell, you must understand how you own the property. The legal process to transfer a deceased person’s home is called the probate process. This court supervised process officially names the heirs and legally transfers the asset.
The Court-Supervised Process
The probate court validates the will, if one exists. It appoints a personal representative. This person settles debts and then distributes assets, like a house, to the rightful heirs. Only after the court issues an order can the title company change the deed.
Think of it as the legal referee ensuring a fair transfer.
Types of Ownership After Death
How the deceased person held the title dictates your next steps. The main structures are:
- Sole owner: The property goes through probate. One heir or many heirs will inherit, which can require agreement to sell.
- Joint tenancy with rights of survivorship: Here, the surviving owner automatically gets full ownership. Probate is often avoided for this property.
- Co-owners as tenants in common (including some married couples): Each owner’s share passes to their own heirs, not necessarily the other owner. This often requires probate.
Why does this matter? If family members or other heirs co-own the property, you all must agree to sell. Getting everyone on the same page is step one.
Why Probate Is Still Required
A will does not avoid probate. It simply guides the court. As one Orlando estate planning attorney noted, “A will is a ticket to the probate courtroom, not a bypass.” The process ensures all debts are paid and clears the title for a clean sale. It protects all parties involved.
The Orlando Advantage
Florida probate has unique local rules. Working with a local real estate attorney who knows Orlando judges and clerks can streamline everything. They handle the paperwork and court dates, which is a huge relief during a difficult time.
How Is Inherited Property Taxed When Sold?
Let’s demystify the tax implications. The good news: Florida has no state income tax and no state inheritance taxes. The decedent’s estate handles any federal obligations before you inherit.
Income Tax vs. Estate Tax
Remember, income tax and estate tax are different. You, the heir, typically won’t pay income tax just for receiving the house. The federal estate tax only impacts very large estates. For 2025, the exemption is $13.61 million per person. Most families won’t file an estate tax return.
Property Taxes During the Sale
Who pays the property taxes until it sells? The estate or the heirs are responsible. Taxes accrue until the deed transfers to the new buyer. Budget for this ongoing cost. For example, if you sell in July, you’ll owe a prorated share of that year’s tax bill at closing.
Rental Income Considerations
Did you inherit a rental property? Any rental income received after the owner’s passing is taxable income to the estate or to you, the heir. You must report it. Keep all records for expenses like repairs or management fees, as these can offset that income.
Understanding Capital Gains on Inherited Property
Here’s the core of most heir’s tax questions: capital gains. You only face a taxable gain when you sell the asset. The gain is the difference between your selling price and the property’s tax basis.
What Creates a Taxable Gain
Simply put: Selling Price – Your Tax Basis = Taxable Gain.
A higher gain could mean owing capital gains tax. Your basis is not what the previous owner paid. It gets a special reset, which is your biggest advantage.
Fair Market Value at Death
The law gives inherited property a “step-up” in tax basis. The new cost basis becomes the fair market value on the date of the owner’s death. Let’s say a parent bought a home for $100,000. It was worth $400,000 when they passed.
Your new property’s tax basis is $400,000. If you sell it for $400,000, your gain is zero. This rule can substantially reduce or even eliminate capital gains taxes.
The Holding Trap
But wait—the basis is not frozen forever. If the current market value rises after you inherit, you create a new gain. Imagine you inherit that home valued at $400,000. You wait two years in a hot market and sell for $500,000. Now you have a $100,000 taxable gain.
Remember, the tax code isn’t a straight line. Acting with purpose helps you determine the best path to minimize what you might pay capital gains tax on later.
Leveraging Stepped-Up Basis Rules to Save Money
This is your most powerful tax tool. The stepped up basis rules can substantially reduce your bill. Let’s see how this works.
What Stepped-Up Basis Means
When a person passes, the property’s tax basis “steps up.” Its new stepped up value is the fair market value at the decedent’s death. The previous owner’s original purchase price becomes irrelevant. This reset is a fresh start for heirs.
Why This Can Eliminate Gains
This rule often wipes out decades of growth for tax purposes. Imagine a home bought for $75,000 in 1980. At the owner’s death, it’s appraised at $350,000. That $350,000 is your new basis.
Sell it for that price, and you have zero taxable gain. You can truly eliminate capital gains taxes on all that inherited appreciation.
Alternate Valuation Date Rules
What if the market dips after the decedent’s death? The IRS offers special rules. An executor can choose an alternate valuation date, exactly six months after the date of death. This can lower the estate’s value if property values fall. A tax pro must help with this election.
How to Avoid Paying Capital Gains Tax on Inherited Property
Smart planning keeps more money in your pocket. You have clear paths to avoid paying taxes on this gain.
Using the Primary Residence Exclusion
Move into the inherited home. Make it your primary residence for at least two years. You could then exclude up to $250,000 of gain from tax if single, or $500,000 if married filing jointly.
This powerful personal residence rule stacks on top of the step-up. It’s a classic one-two punch for tax savings.
Selling at Fair Market Value
Often, the simplest path is the best. Selling the property near its appraised value at inheritance typically results in minimal gain. You likely will not face large capital gains tax obligations. Acting with reasonable speed locks in that stepped up basis.
Gifting Inherited Property Risks
You might think of gifting inherited property to a child. Please pause. This can backfire. You give them your low tax basis along with the house. They could face a massive tax bill later.
After all, the tax law is a series of booby traps. Gifting is often one of them.
Get Professional Guidance
Your unique situation dictates the best move. A qualified tax professional analyzes your entire picture. They look at inherited assets, other assets, and your financial goals.
This complex process demands expert insight. Their guidance is the surest way to avoid capital gains taxes legally.
Selling Inherited Property to a Cash Buyer in Orlando
Sometimes a traditional sale adds stress. A cash offer provides a different path for selling inherited property.
Selling As-Is
Most inherited homes need work. A cash buyer purchases the property in its current condition. You skip repairs, deep cleanouts, and staging. This is a major relief for family members dealing with a family home full of memories and items.
Speed and Certainty
Probate has enough delays. A credible cash buyer provides a fast, guaranteed closing. They help move the estate from probate to sold in weeks, not months. This speed brings certainty to all the owners and heirs involved.
Avoiding Commissions
In a standard real estate sale, you pay 5-6% in agent commissions. A direct cash sale avoids these fees. More of the final sale price goes directly to the heirs. This preserves the value of your inherited asset for the family.
Final Thoughts
Navigating an inherited property involves two main paths: the legal process of probate and the tax implications of a sale. Understanding the stepped up basis is your biggest advantage against capital gains taxes.
This knowledge turns a potentially complex situation into a manageable one. You can make clear decisions about whether to sell and when.
We hope this guide brings clarity. For more detailed help tailored to Orlando, explore more resources on our homepage. Let us help you determine your best path forward with confidence.
