Anyone who inherits a house asks much the same thing: when can I sell it and how much will I pay? The short answer is that you cannot sell what is not yet in your name, and that selling an inherited home brings three taxes, paid at different times. If you know the order of the steps and which tax falls due at each stage, you avoid nasty surprises and, very often, overpaying.
In this article we go through the paperwork you need to complete before selling, the three taxes, how the gain is calculated for personal income tax (IRPF) and the cases we see most in Valencia, including the one with several heirs.
In this article
Essential steps before selling
Many sales are held up because the property is still in the name of the person who died. Before you can sell it, it has to be put in the heirs' names. These are the steps.
Accept the inheritance
No one inherits automatically: you have to accept the inheritance. You can do so purely and simply or under benefit of inventory, which limits your liability to the value of what is inherited. Before deciding it is worth properly assessing the assets and the liabilities, because debts are inherited too. If you are unsure, review how accepting or renouncing an inheritance works.
Deed of acceptance and award of the inheritance
With the death certificate, the certificate of last wills and the will or the declaration of heirs, the deed of acceptance and award of the inheritance is signed before a notary. It lists the assets and awards each heir their share. This is the document that proves the home is now yours.
Register the property at the Land Registry
Once the deed is signed and the taxes are paid, the home is registered at the Land Registry in the heirs' names. Only when the property is in your name can you sell it safely: the buyer and their bank will insist that ownership is properly registered.
Put another way: you cannot sell what is not in your name. To sell, the inheritance must first be accepted and divided before a notary, although this can be done on the same day and at the same notary as the sale. Registration is not legally required to sign, but the buyer and their bank will want it done, or at least under way.
The three taxes when selling an inherited home
Selling an inherited home does not mean one tax but three, each paid at a different stage. It helps to keep them apart, so you do not mix up what it costs to inherit with what it costs to sell.
1. Inheritance Tax (on inheriting)
The first tax is paid when you receive the inheritance, not when you sell. It is Inheritance Tax, which is charged on the value of the assets inherited and, as a general rule, has to be paid within six months of the death. It is a regional tax, so how much you pay depends heavily on the region where the deceased lived.
In the Valencian Community there is a very favourable allowance on inheritances between direct family members (spouse, children and descendants, parents and ascendants), which significantly reduces the amount payable for most families. You will find the detail of requirements and degrees of kinship in our article on Inheritance Tax in the Valencian Community.
2. Municipal capital gains tax (IIVTNU)
The second tax is the municipal capital gains tax (plusvalía), technically the Tax on the Increase in Value of Urban Land (IIVTNU). It is charged by the town council and taxes the increase in the value of urban land from the time the property was acquired until it is transferred.
Watch out here: on an inherited home the municipal capital gains tax comes up twice, once on inheriting (the transfer from the deceased to the heirs) and again on selling (the transfer from the heirs to the buyer). The amount depends on the municipality and the calculation method that applies, and it is not the same in every town council. We explain it in detail in the municipal capital gains tax on an inheritance.
3. Capital gain in personal income tax (on selling)
The third tax is the capital gain in personal income tax (IRPF), declared in the tax return for the year after the sale. This is the sum that matters most in the whole process: the gain is the transfer value minus the acquisition value.
On an inherited home, the acquisition value for income tax purposes is, as a general rule, the value that was declared in Inheritance Tax when inheriting. That is why the value you record when accepting the inheritance directly determines how much gain will be taxed later on the sale.
How the gain is calculated and why the declared value is key
The capital gain is, put simply, the difference between what you obtain on selling (transfer value, less the costs and taxes inherent to the sale borne by the seller) and what it cost to acquire the home (acquisition value, plus the costs and taxes of the acquisition and certain improvement works).
What is different about an inherited home is that you did not buy it: you received it. That is why the acquisition value is the one that resulted for Inheritance Tax, capped at market value, plus the inheritance costs and taxes attributable to the home. If a very low value was declared on inheriting in order to pay less Inheritance Tax, the gain on selling will be greater and so will the income tax. The reverse is also true: a sensible, well-documented value on inheriting reduces the future gain. So it pays to think about the sale when you accept the inheritance, not when the buyer turns up.
The rate applied to that gain follows the savings scale of income tax, which is progressive: the greater the gain, the higher the applicable marginal rate. There is no single percentage; it depends on the amount of the gain and on the taxpayer's other savings income.
Cases of exemption or non-taxation in income tax
You do not always have to pay tax on the gain. Income tax rules provide for several cases in which the gain is exempt, wholly or partly. The two most common when selling a home are:
Reinvestment in a main residence. If the home you are selling was your main residence and you reinvest the proceeds in acquiring another main residence within the legally prescribed period, the gain can be exempt in the reinvested part. On an inherited home this only applies if that home had actually become your habitual residence.
People over 65. The gain from the transfer of the main residence is exempt when the seller is 65 or older. In addition, people over 65 who reinvest the sale proceeds in a life annuity within six months can make the gain exempt, even if what they sold is not their main residence. The limit is €240,000 reinvested in total, and if only part is reinvested, the exemption is proportional.
These cases require meeting specific requirements as to deadlines and main-residence status, so it is worth confirming them case by case before signing.
Several heirs: joint ownership and dissolution of co-ownership
It is usual for the home to be inherited not by one person but by several siblings or other heirs. The house is then held in joint ownership (proindiviso): everyone owns a share, but no one owns a specific physical part. In practice there are two ways to sell.
Selling by mutual agreement. If all the co-owners agree, the home is sold to a third party and the price is divided according to each one's share. It is the simplest route when there is understanding among the heirs.
Dissolution of co-ownership. If one of the heirs wants to keep the home and compensate the others, the dissolution of co-ownership is used: the one who keeps the house acquires the others' shares and pays them their part. It also has a tax advantage over a sale between them, because the dissolution of co-ownership usually receives more favourable treatment, although each case must be analysed.
When there is no agreement, the law lets you apply for division of the common property, but it is the slowest and most contentious route. It is almost always better to negotiate a settlement, with advice, than to get to that point.
Practical tips for Valencia
Before putting the home on the market, check that everything is in order: that the deed of acceptance and award has been signed, that Inheritance Tax was paid within the deadline (bearing in mind the Valencian regional allowance) and that the property is registered in the heirs' names. With that done, selling is much easier.
It is also worth working out in advance the two municipal capital gains charges that may arise at the town council itself and estimating the income-tax capital gain from the value declared for Inheritance Tax. With that done you can set a realistic sale price and avoid a shock in the following year's tax return.
At Equus Capital we handle all of this in Valencia: the acceptance and award of the inheritance, the settlement of taxes, coordination with the Registry and the taxation of the sale, including when there are several heirs. First consultation free and with no obligation.
Frequently asked questions
Can an inherited house be sold without accepting the inheritance?
No. Before selling you have to accept the inheritance, execute the deed of acceptance and award before a notary and register the property at the Land Registry in the heirs' names. You cannot sell what is not yet in your name, because the buyer and their bank will require ownership to be correctly registered.
What taxes are paid when selling an inherited house?
Three taxes come in at different moments: Inheritance Tax on inheriting (with a favourable allowance in the Valencian Community for direct family members), the town council's municipal capital gains tax (IIVTNU), which on an inheritance can appear both on inheriting and on selling, and the capital gain in personal income tax (IRPF) on selling the home.
How much income tax is paid for selling an inherited home?
You are taxed on the capital gain, calculated as the transfer value minus the acquisition value, which on an inheritance is the value declared in Inheritance Tax. That gain is included in the savings base of income tax, which has a progressive scale, so there is no single percentage: it depends on the amount of the gain. In addition, there are cases of exemption, such as reinvestment in a main residence or the sale of the main residence by people over 65.
How do we sell if there are several heirs?
The home is held in joint ownership (proindiviso) and there are two main routes. Selling by mutual agreement to a third party and dividing the price according to each heir's share, or the dissolution of co-ownership, where one keeps the house and compensates the others financially. The second usually has more favourable tax treatment than a sale between heirs, although each case is worth analysing.