Inherited Property Calculator
Understand stepped-up basis, compare sell vs rent vs keep, and model long-term strategies for inherited real estate.
| Year | Annual Rental Income (net) | Cumulative Rental Income | Projected Home Value | Net Sale Proceeds |
|---|---|---|---|---|
| 1 | $11,268 | $11,268 | $465,750 | $437,805 |
| 2 | $11,606 | $22,874 | $482,051 | $453,128 |
| 3 | $11,954 | $34,828 | $498,923 | $468,988 |
| 4 | $12,313 | $47,141 | $516,385 | $485,402 |
| 5 | $12,682 | $59,823 | $534,459 | $502,391 |
How to Use This Inherited Property Calculator
This calculator helps you navigate the three major decisions when you inherit real estate: understanding your new tax basis, choosing between selling, renting, or keeping the property, and modeling long-term strategies.
Quick Tier — Tax Basis and Holding Cost
Enter the property's Fair Market Value at Death (get this from an appraisal or recent comparable sales), the original purchase price, any remaining mortgage balance, and annual carrying costs. The calculator instantly shows your stepped-up basis, confirms you owe $0 in capital gains if sold at FMV, and reveals your monthly cost to hold the property.
Advanced Tier — Sell vs Rent vs Keep
Adjust selling costs, vacancy rate, and property management fees to see a realistic 3-way financial comparison. The Tax Analysis tab explains exactly how stepped-up basis works and what rate applies to future gains. Estate Considerations covers the practical steps of clearing title and navigating probate.
Pro Tier — Long-Term Strategy
The 5-Year Hold Analysis builds a year-by-year model of renting the property and selling later, combining rental income with projected appreciation. The 1031 Exchange tab shows how to defer gains by reinvesting into a new property. Multi-Heir Split compares buying out co-heirs, selling, or continuing co-ownership.
The Stepped-Up Basis Explained
Capital Gains (if sold at FMV) = Sale Price − Your Basis = $0
Future Gains = Sale Price − FMV at Inheritance
Original Owner's Gain Eliminated = FMV at Death − Original Purchase Price
The stepped-up basis is one of the most significant tax benefits in US real estate. It permanently erases all capital gains that accumulated during the original owner's lifetime. A home bought for $80,000 in 1985 and worth $500,000 today would have had $420,000 in taxable gains — but if inherited, that gain simply disappears.
Example: Inheriting a Paid-Off Family Home
Sarah Inherits Her Parents' Home in Austin, TX
Sarah inherits a home her parents bought for $95,000 in 1992. The home is now worth $580,000 and is owned free and clear.
| Original Purchase Price | $95,000 |
| FMV at Inheritance | $580,000 |
| Sarah's New Basis | $580,000 |
| Gain Eliminated | $485,000 (tax-free) |
| Capital Gains If Sold Now | $0 |
| Annual Property Tax | $9,000 |
| Annual Insurance | $2,400 |
| Annual Maintenance | $5,800 (1% of value) |
| Monthly Holding Cost | $1,433 |
| Potential Monthly Rent | $2,800 |
| Net Monthly Rental Profit | ~$580 after all expenses |
Sarah decided to rent the property for 5 years, collecting income while the property appreciates, then sell when she retires. The stepped-up basis means any future sale gain is only on appreciation after 2024.
Sell vs Rent vs Keep — Decision Framework
There is no universally correct answer. Consider these factors:
- Sell now makes sense if: you need liquidity, the property needs major repairs, multiple heirs disagree, or you don't want to be a landlord. Zero capital gains if sold quickly at FMV.
- Rent makes sense if: rental income exceeds carrying costs, the market has strong appreciation potential, or you want passive income but aren't ready to sell.
- Keep as second home makes sense if: you can afford the carrying costs, you use the property seasonally, or it has strong sentimental value you want to preserve.
The 45-day window after inheritance is often emotionally charged. Financial advisors generally recommend not making permanent decisions in the first 30-60 days if circumstances allow.