Selling an Inherited Home in North DFW: What Heirs Actually Owe in Taxes
Do you have to pay taxes on an inherited home you sell in Texas?
Texas has no state capital gains tax, but federal capital gains tax can still apply when you sell an inherited home. Most heirs owe little to no federal capital gains tax because of the stepped-up basis rule, which resets the home’s cost basis to its fair market value on the date of the original owner’s death, not the price they originally paid. Your main financial considerations as an heir are federal capital gains on any appreciation since inheriting, plus ongoing county property taxes during the time you hold the home before selling.
By Stacy Cate, Realtor | Compass RE Texas, LLC, August 3, 2026
If you’ve inherited a home in Prosper, Celina, McKinney, or Frisco, one of the first questions you’ll ask is some version of: how much of this am I going to owe the government?
The good news is that the answer is usually less than people expect. The confusion almost always comes from mixing up two different things, Texas’s lack of a state capital gains tax and the separate federal rules that still apply.
The stepped-up basis is the number that actually matters
Here’s the piece of this that changes everything: when you inherit a home, your cost basis isn’t what the original owner paid for it decades ago. It’s reset to the home’s fair market value on the date they passed away.
That’s called the stepped-up basis, and it’s the reason most heirs owe little to no capital gains tax when they sell.
Say a family home in McKinney was purchased for $180,000 in 1995 and is worth $650,000 today. If you’d bought that house yourself in 1995 and sold it now, you’d owe capital gains on roughly $470,000 of appreciation. But because you inherited it, your basis steps up to that $650,000 value at the date of death. If you sell close to that value, your taxable gain could be close to zero.
What you actually owe, and when
Texas doesn’t tax the sale itself. There’s no state income tax and no state capital gains tax, full stop. That part is straightforward.
Federal capital gains tax can still apply, but only on appreciation that happens after you inherit the home, not on the decades of appreciation before the original owner passed. If the home sells for close to its stepped-up basis value, there’s often little to no federal gain to report.
If you hold the home for a while before selling and it appreciates further, that additional gain is taxable. Gains held longer than a year are taxed at long-term capital gains rates, 0%, 15%, or 20% depending on your total taxable income.
County property taxes keep running the whole time you hold the home. This is the cost people forget about. Whether the home sits vacant during probate or you’re renting it out while deciding what to do, Collin County (or Denton or Grayson County, depending on where the property sits) still expects its property tax payment.
Timing matters more than most heirs realize
If you sell an inherited home relatively soon after inheriting it, before it has time to appreciate significantly beyond its stepped-up basis, you’re in the best position to owe little to no federal capital gains tax.
The longer you hold it, especially in a market like McKinney or Prosper where values have continued climbing, the more room there is for taxable appreciation to build up between the date of death and the date of sale.
This isn’t a reason to rush a decision you’re not ready to make. Grief has its own timeline, and I never push a client to sell before they’re ready. But it is worth knowing, so that if you are leaning toward selling, you understand how the calendar affects the number on your tax return.
What I walk heirs through
Selling an inherited home is rarely just a financial transaction. It usually comes with sorting through a lifetime of belongings, coordinating with siblings or other heirs, and making decisions during a season that’s already emotionally full.
On the practical side, here’s what I help families think through:
- Getting a professional appraisal or a strong comparative market analysis close to the date of death, so you have a defensible number for the stepped-up basis if the estate didn’t already establish one through probate.
- Understanding whether the home needs to go through probate before it can be sold, and how that affects your timeline.
- Deciding whether to sell as-is or make targeted updates, since a home that’s been in a family for decades often needs some work before it shows its full value.
- Coordinating with multiple heirs when a property is inherited by siblings or other family members who may have different timelines or priorities for the sale.
This is exactly the kind of transition I specialize in, guiding families through selling a home that carries history, not just square footage, with clarity and without pressure.
Frequently Asked Questions
Does Texas have an inheritance tax or estate tax?
No. Texas does not have a state inheritance tax or a state estate tax. Your main tax exposure comes from federal capital gains tax if the home appreciates after you inherit it, and federal estate tax only applies to very large estates above the federal exemption threshold.
What is the stepped-up basis, and why does it matter for an inherited home?
The stepped-up basis resets the home’s cost basis to its fair market value on the date of the original owner’s death, rather than what they originally paid. This is what allows most heirs to owe little to no capital gains tax when they sell soon after inheriting.
Do I owe capital gains tax if I sell an inherited house right away?
Often very little to none, because the sale price is usually close to the stepped-up basis value if you sell soon after inheriting. Any gain is generally limited to appreciation between the date of death and the date of sale.
Who pays the property taxes on an inherited home before it sells?
The estate or the heirs are responsible for ongoing county property taxes while the home is held, regardless of whether it’s occupied, vacant, or being rented. This continues until the home sells or ownership formally transfers.
Do I need to go through probate before I can sell an inherited home in Texas?
In many cases, yes, though the specifics depend on how the property was titled and whether there was a will. It’s worth confirming this early with an estate attorney or the executor, since it directly affects your timeline for listing and selling.
If you’ve inherited a home in North DFW and you’re starting to think through what selling actually looks like, I’m glad to walk you through it, from the tax basics to coordinating with other heirs to getting the home ready to list, whenever you’re ready. Grab my Seller’s Guide for the full process, or reach out anytime.
About Stacy Cate
Stacy Cate is a Realtor with Compass RE Texas, LLC, serving North DFW’s luxury and lifestyle homes across Prosper, Celina, McKinney, Frisco, and the lake markets of Bois d’Arc Lake and Lake Texoma. With 30+ years of local roots, deep community ties, and CNE, CLHMS, SRES, and NHSAC designations, Stacy guides clients, especially those navigating legacy transitions and life-stage moves, with clarity, privacy, and heart.