Inherited Property and Capital Gains Tax: What You Need to Know

Understanding how capital gains taxes (CGT) work in the context of inherited estates can be tricky. Typically, CGT events occur when ownership of an asset changes hands. However, in the case of deceased estates, the CGT event is recognized on the day the person passes away.

There are special rules that exempt capital losses and gains when assets are inherited. But once the beneficiary sells the inherited asset, CGT might apply.

Sometimes, the CGT bill on the sale of an inherited property can take a substantial chunk out of its value. Yet, by understanding specific timing requirements, it’s possible to reduce or even wipe out the CGT bill on property inherited from deceased estates.

If the deceased acquired the property before 20 September 1985, it might be CGT exempt if sold within two years of their passing. Even after this period, it could still be CGT-free if the beneficiary used it as their main residence and didn’t earn income from it.

For properties acquired after 20 September 1985, stricter conditions apply to avoid CGT when the beneficiary sells the property.

Remember, the usual 50% CGT discount applies to the sale of inherited properties held for more than twelve months. Understanding these rules can significantly impact the CGT burden when dealing with inherited property.

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