- Stepped-up basis: In most cases, inherited land receives a “stepped-up basis” to its fair market value at the date of inheritance. This means you generally only pay capital gains tax on the appreciation that occurs after you inherit the land, not the total value.
- Estate tax exemption: The federal estate tax only applies to very large estates exceeding a significant threshold (over $12 million in 2024). So, for most inherited land sales, you likely won’t owe estate tax.
- Mortgage interest deduction: If you take over the mortgage on the inherited land and use it for business or rental purposes, you may be eligible to deduct the mortgage interest from your taxes.
It’s important to consult with a tax advisor specializing in inheritance to understand your specific tax situation and potential benefits.