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Did you inherit art from a loved one following their death? In a handful of states, including Iowa, Kentucky, Nebraska, Maryland, New Jersey, and Pennsylvania, you may have to pay an inheritance tax when you receive this artwork. However, this is not the case in Missouri, as Missouri state probate laws don’t call for inheritance taxes.
However, you may have to pay a tax on the sale of art you’ve inherited in some cases. More specifically, selling inherited artwork might subject you to a capital gains tax. You must keep this in mind before deciding to sell inherited art in the first place.
Learn more about the possibility of having to pay taxes on the sale of inherited artwork below as you and your family move through the probate process.
You Don’t Typically Need To Pay a Tax for Inheriting Art
Some people are under the impression that they will need to pay a tax simply for inheriting art from a loved one after their death. This is usually not the case.
Many states, including Missouri, do not impose an inheritance tax or estate tax on families when they receive inheritances from loved ones. This allows you to inherit items like art from a loved one who went through the proper estate planning without worrying about the taxes that may come along with an inheritance.
The only tax you might have to pay after receiving an inheritance is a federal estate tax. However, this tax is designed only to tax families that receive unusually large inheritances from their loved ones. The Internal Revenue Service has set the threshold for this estate tax at just over $13.6 million.
Unless the inheritance you receive from a loved one exceeds that amount, you shouldn’t be subjected to any inheritance or estate taxes in Missouri.
You May Have To Pay a Tax on the Sale of Art You’ve Inherited
If you’re an art lover and wish to keep the artwork you’ve inherited from a loved one, you’re more than welcome to do just that. This is a quick, easy, and effective way to avoid paying any taxes on inherited art.
If, however, you aren’t an art enthusiast, or you could use the money that may come from selling a loved one’s artwork, you’re also welcome to list it for sale. You can do this in several ways.
Some people choose to sell artwork on their own, while others call on art appraisal services or auction houses to sell artwork on their behalf for a commission.
Either way, you will usually pay a tax on the sale of art you’ve inherited once it sells. But you’re only responsible for paying a capital gains tax. This tax is based on how much the artwork was worth when you inherited it versus how much it was worth when you sold it.
To calculate the income taxes owed on capital gains, you must:
- Find out what the appraisal value for the artwork was at the time of your loved one’s death
- Subtract this value from the artwork’s current fair market value
Sometimes, exceptions may apply to the capital gains taxes owed on items like inherited artwork. This is why you should always speak with a tax professional before assuming you’ll owe taxes after selling art previously owned by a loved one.
You Can Avoid Paying a Tax on the Sale of Inherited Art
You can avoid paying a tax on the sale of inherited art by being strategic about how much you sell it for. To steer clear of paying a capital gains tax, try to sell inherited artwork for as close to fair market value as you can. Sell this art soon after inheriting it as well to prevent it from increasing in value too much.
As you might imagine, it could be more beneficial to see the appraisal value of artwork go up and pay capital gains taxes when you sell it than to let it go for fair market value now. However, taking this approach might leave money on the table.
It’s wise to consider all your options when it comes to paying a tax on the sale of art you’ve inherited. Maximize profits by choosing the right time to sell inherited art and minimizing the capital gains taxes you owe on it.
You May Have To Pay Taxes on the Sale of Other Inherited Items, Too
You may have to pay taxes on the sale of more than just inherited art. In general, any inherited items that will increase in value as time goes on will also subject you to capital gains taxes when you sell them.
Examples include:
- Real estate
- Vehicles
- Sports memorabilia
- Stocks and bonds
Carefully consider what you’ll do with these items after inheriting them. Decide whether to sell them sooner rather than later or hold on to them as long-term investments.
Contact Rockpoint Probate Funding To Apply for Financial Help During the Probate Process
Navigating the probate process presents challenges. Rockpoint Probate Funding is here to help families avoid skipping crucial steps, such as determining whether they need to pay a tax on the sale of any art they happen to inherit.
We can provide you with a probate advance while you wait for the executor of a loved one’s estate to begin distributing assets. Call us at (888) 263-8588 to discover more about how a probate loan will benefit you.
