Should You Rent Out or Sell an Inherited House in Indiana?

It depends on three things: whether you want to be a landlord, what the house needs before anyone can live in it, and whether everyone who inherited it agrees. Renting can bring in income, but it also brings repairs, insurance, vacancies and tenant calls. Selling ends those costs but has its own steps. Indiana has no inheritance tax, and a CPA can tell you how federal taxes apply to your situation.

Lesa Miller is a REALTOR® and broker in Bloomington, Indiana, who helps buyers and sellers in Bloomington, Bedford, Martinsville and the surrounding towns. I talk with families about inherited homes often, so here's how I'd think it through.

Who gets to decide?

If the estate is open in probate, the personal representative is usually the one who can act for the estate, and the court process may affect the timing. If several heirs own the house together, everyone needs to be on the same page before it's rented or sold. How Do You Sell an Inherited House When Siblings Disagree in Indiana? covers what to do when they aren't.

What does renting it out really involve?

• Getting it rent-ready. Older homes often need repairs or updates before a tenant moves in.

• Insurance. A rental usually needs a different policy than an owner-occupied home. Call your insurance agent before anyone moves in.

• Property taxes. Indiana law caps property taxes at 1% of assessed value for a homestead, the owner's main home, and 2% for other residential property. If the house isn't your main home, plan on the higher cap. Your county auditor can tell you how it applies to your bill.

• Vacancies and tenant calls. Someone has to handle the furnace that quits on a Sunday. If you live out of town, that usually means paying a property manager. What Out-of-State Investors Should Know Before Buying Here has more on owning from a distance.

For the renter's side of the same question, see Should You Rent or Buy in Bloomington or Bedford Right Now?

What does selling involve?

You'll decide whether to sell the house as it is or fix things first. We price it based on the data available to us, ideally just below what the market will truly pay, and watch how buyers respond. If there's still a mortgage on the house, see Inheriting a House With a Mortgage: What Happens Next. And while it sits empty, keep the heat on and someone checking on it.

What about taxes?

Indiana repealed its inheritance tax in 2013. It only applied to people who died on or before Dec. 31, 2012, according to the Indiana Department of Revenue.

For federal taxes, the IRS says the basis of inherited property is generally its fair market value on the date of death. What that means for a sale or a rental depends on your situation, so talk to a CPA before you decide.

Three questions to answer first

1. Can you be a landlord, or pay someone to be one?

2. What will the house need first, and who pays for it?

3. Do all the heirs agree on keeping it, renting it or selling it?

Frequently asked questions

Does Indiana have an inheritance tax?

No. Indiana repealed its inheritance tax in 2013. It applied only to people who died on or before Dec. 31, 2012.

What is the tax basis of an inherited house?

The IRS says the basis of inherited property is generally its fair market value on the date of the owner's death. Ask a CPA how that applies to you.

Do property taxes change if I rent out an inherited house?

They can. Indiana's 1% property tax cap is for a homestead, the owner's main home. Other residential property is capped at 2%.

Inherited a house and not sure what to do with it? Call or text (812) 360-3863, or visit LesaMillerRealEstate.com/Links. Let's talk through your options.

This post is general information, not tax or legal advice. Talk to a CPA or attorney about your situation.