This is the thing that surprises people the most — and it’s usually good news.

When you inherit a home, the IRS gives you what’s called a stepped-up basis. This means your cost basis for tax purposes is reset to the fair market value of the home on the date of the owner’s death — not what they originally paid for it decades ago.

Here’s why that matters:

If your parent bought their Orange County home in 1985 for $180,000 and it’s worth $850,000 today, you don’t owe capital gains tax on that $670,000 gain — because your basis started at $850,000, not $180,000.

If you sell relatively quickly after inheriting and the home hasn’t appreciated much since the date of death, your capital gains tax bill may be very small — or zero.

This changes if you rent the home for a period of time. Depreciation, rental income, and the passage of time all affect your tax picture. That’s why it’s worth a conversation with your CPA before you decide which path to take.

I’m not a tax advisor. Always confirm your specific situation with a qualified CPA.