What taxes apply when you sell an inherited house?
How the stepped-up basis works, and what Maryland, Virginia and DC do and don't tax when a home passes to heirs.
No obligation. No pressure. Takes about 2 minutes.
The short answer
For federal income tax, your basis in an inherited house is generally its fair market value on the date of death, not what the person who died paid for it. So if you sell soon after, for about that value, there is often little or no gain to tax. Maryland has an inheritance tax, but spouses, children, siblings and other close relatives are exempt; Virginia has no inheritance or estate tax; and DC's inheritance tax only covers deaths before April 1, 1987.
Step by step
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1
Start from the value at death
IRS Publications 551 and 523 say the basis of inherited property is generally its fair market value on the date of death, or on a later alternate valuation date if the personal representative chooses one. Your gain is the sale price, minus selling expenses, minus that basis.
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2
Get the value documented
An appraisal as of the date of death gives you and your tax professional a number to work from. It is the starting point for everything else.
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3
Maryland: check who inherits
The Register of Wills says spouses, children, grandchildren, stepchildren, parents, grandparents, siblings, a child's spouse and (for deaths on or after October 1, 2023) registered domestic partners are exempt from Maryland inheritance tax. Others, such as nieces, nephews, cousins and friends, pay 10%.
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4
Virginia and DC
Virginia Tax says Virginia no longer has an estate tax or inheritance tax, though certain remainder interests are still subject to inheritance tax. DC's Office of Tax and Revenue says its inheritance tax applies to deaths before April 1, 1987. DC does have an estate tax return for larger estates: $4,873,200 or more for deaths in 2025, filed by the personal representative within 10 months.
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5
Know the home-sale exclusion rules
The $250,000 / $500,000 exclusion depends on your own ownership and use of the home for two of the last five years, so it only helps if you meet those tests yourself. A surviving spouse has special rules in Publication 523.
Sources: IRS Publication 551, Basis of Assets · IRS Publication 523, Selling Your Home · Maryland Register of Wills, Inheritance Tax · Virginia Tax, Estate and Inheritance Taxes · DC Office of Tax and Revenue, DC Estate, Inheritance and Fiduciary Tax Information
This is general information, not tax or legal advice. Estates can have details that change the answer; talk with a tax professional or estate attorney, and the Register of Wills or probate court, before you rely on it.
Cash offer vs listing
Example: a $250,000 home
| Offer | $205,000 |
|---|---|
| Repairs | $0 |
| Commissions | $0 |
| Closing costs | $0 |
| You walk away with | $205,000 |
| In 7 to 14 days | |
| Sale price | $250,000 |
|---|---|
| Repairs | about $8,000 |
| Commissions | about $13,800 |
| Closing and holding | about $6,000 |
| You walk away with | about $222,200 |
| In 60 to 90 days | |
Example only. Your numbers depend on your home and market.
Because the sale price sets your gain, we show the cash offer next to what listing could net, so you and your tax professional can see both numbers.
Frequently asked questions
What is a stepped-up basis?
It means your tax basis in the inherited house is generally its fair market value on the date of death. If you sell for about that amount, there may be little or no gain to tax.
Do I owe Maryland inheritance tax on my parent's house?
No. Children are exempt from Maryland inheritance tax, as are spouses, siblings, grandchildren, parents and some other close relatives. Others, such as nieces, nephews and friends, pay 10%.
Does Virginia or DC tax an inheritance?
Virginia no longer has an inheritance or estate tax, except for certain remainder interests. DC's inheritance tax only applies to deaths before April 1, 1987, but DC has an estate tax return for estates over its threshold.
Who are you?
We are real estate investors based in Baltimore, helping homeowners since 2016. We buy houses directly for cash. We are not a licensed real estate brokerage and do not list homes ourselves; if listing could get you more, we show you the math so you can choose.