Inheritance tax
In some states, if you inherit a home, you may owe taxes. New York, however, is not one of these states. However, you will be responsible for any property taxes owed on the home. It’s also possible that a lien might exist on the property if the previous owner was not up to date on their taxes, which you would be responsible for.
Selling an inherited home can come with a tax advantage called a “stepped-up basis.” Instead of using the amount the previous owner originally paid, the IRS generally bases your cost basis on the home’s fair market value when they passed away. This means you’ll generally pay capital gains tax only if you sell the home for more than its fair market value when you inherited it, and only on the difference after eligible adjustments.
»Learn more: Want to know exactly how much you’ll walk away with from your home sale? Use our New York closing cost calculator to get a personalized estimate of your selling expenses and see your potential proceeds after closing.
Other selling expenses you might encounter in New York
Title fees: Title fees typically include a title search and title insurance. Title insurance helps protect both the buyer and lender from potential problems with a home’s title. These issues could include things like forged documents, a previously unknown will, or restrictions on the deed that weren’t discovered during the title search. Who pays the title insurance can vary by state, and in New York, this typically falls to the buyer.
Settlement fees: Also called escrow fees, settlement fees are usually 1% of the home sale value. This lump sum is charged by the title company, escrow company, or attorney handling the closing process. These fees typically cover the costs of preparing final documents, completing the transaction, and distributing payments to the appropriate parties. The exact amount and who pays these fees can vary depending on the agreement between the buyer and seller.
Agent commissions: Historically, sellers paid a total commission of around 5% to 6% of the home’s sale price, which was usually split between the listing agent and the buyer’s agent. But after the National Association of Realtors settlement changed how agent fees are handled, buyers now work directly with their agents to negotiate their own commission costs. For sellers, this typically means paying only their listing agent’s commission, which is often around 2.5% to 3% of the sale price, depending on the agreement.
How to prepare for New York real estate taxes
Real estate taxes don’t need to be intimidating, and they don’t need to catch you off guard. There are several ways you can get an idea of what you’ll owe before the time comes to sell your home, and HomeLight is here to help. Here are some final steps to consider:
- Know your home’s value: Use an online automated valuation model (AVM) tool like HomeLight’s free Home Value Estimator. Having a ballpark idea of what your home might be worth can help you calculate the potential capital gains from the home sale.
- Save the right documents: Know what tax documents you’ll need to sell before doing so. Consult with your tax professional about the federal and state documents needed in New York and the tax breaks you might qualify for.
- Find a top agent: An experienced real estate agent can guide you through the home sale process. They can help you understand your tax burden and maximize your profits. Our data shows that the top 5% of real estate agents across the U.S. sell homes for 10% more than the average real estate agent.
HomeLight makes it easy to find top real estate agents in your market. From our Agent Match tool to innovative programs like Simple Sale and Buy Before You Sell, we have you covered when it comes to selling your home, ensuring every transaction is simple, certain, and satisfying.
Editor’s note: This post is for educational purposes only, not financial, tax, or legal advice. HomeLight recommends consulting an advisor for guidance tailored to your situation.
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