Mile High Home Group – Welcome to Denver

In most cases, heirs face little to no capital gains tax on inherited property thanks to the step-up in basis rule, which resets the cost basis to the home’s fair market value at the date of death—taxes only apply to appreciation after inheritance. With 15+ years in Denver real estate and thousands of transactions, I’ve helped families navigate this from Highlands Ranch real estate to Littleton properties, maximizing their net proceeds in the Colorado housing market.

How Step-Up Basis Minimizes Taxes

Federal tax code (IRC §1014) steps up the basis for inherited assets. If a parent bought a Denver home for $300,000 decades ago, now worth $900,000 at death, heirs inherit at $900,000 basis. Sell immediately for $920,000? Only $20,000 gain is taxable at long-term rates (0-20% federal, plus 4.55% Colorado state over exemptions).

Colorado conforms to federal rules with no estate tax, and principal residence exclusion ($250K single/$500K married) applies if heirs qualify post-inheritance. Trusts and joint tenancy survivors get similar treatment.

When Taxes Might Apply

Hold longer and values rise—sell two years later at $1M? Tax on $100,000 gain. Multiple heirs selling shares trigger proportional taxes. Gifts during life carry carryover basis, taxing recipients on donor’s original cost—inheritance avoids this trap.

Rental conversions post-inheritance start depreciation recapture. 1031 exchanges defer taxes if reinvesting commercially.

Practical Advice for Heirs

From guiding countless estates:

• Appraise at death for IRS records—use professionals for accuracy.
• Document inheritance date and basis for future sales.
• Sell quickly if cash needed; hold for exclusion if living there two of five years.
• Split proceeds via agreement to avoid disputes.
• Coordinate with tax advisors—file Form 1099-S accurately.

This structure rewards holding until death, shielding families from decades of gains. Many clients turn inheritances into wealth-building steps, becoming long-term friends.

If you’d like honest guidance, market insight, or a no-pressure conversation about capital gains on your inherited property, reach out—I’m here. Visit www.MileHighHomeGroup.net to search properties, explore Denver, learn more about me, and connect.