$350,000: Is That Your Sale Price or Your Gain? It Makes a Huge Tax Difference
When someone asks how much capital gains tax they'll pay on "$350,000," there's an important question hiding underneath: is that $350,000 the amount you're selling for, or the amount you actually profited? These lead to very different tax bills — and mixing them up is one of the most common sources of confusion we hear from families at Real Time Home Buyers Metro Detroit.
Scenario 1: $350,000 Is the Sale Price
If you sell an inherited house for $350,000, capital gains tax isn't calculated on that full amount. It's calculated on the difference between the sale price and your stepped-up basis (the home's value on the date the original owner passed away).
For example: if the home was worth $330,000 when you inherited it and you sell it for $350,000, your taxable gain is just $20,000 — not $350,000. At a combined federal and Michigan rate in the neighborhood of 19–20% for many filers, that could mean a tax bill of roughly $3,800–$4,000, a world away from what you'd owe if the whole $350,000 were taxable.
Scenario 2: $350,000 Is the Actual Gain
If $350,000 is the profit itself — meaning the sale price minus your basis equals $350,000 — that's the number that actually gets taxed. In that case, you're looking at federal long-term capital gains tax (mostly at the 15% rate for most filers, based on 2026 brackets) plus Michigan's flat 4.25% state rate, which combined could put your total tax bill somewhere around $60,000, give or take, depending on your other income.
Why the Distinction Matters So Much
These two scenarios can result in a tax bill that differs by tens of thousands of dollars, even though both involve the number "$350,000." This is exactly why the stepped-up basis rule matters so much for anyone selling an inherited property — it's the difference between the sale price and the gain that determines your actual tax exposure, and for many heirs who sell relatively soon after inheriting, that gap is often much smaller than people expect.
How to Figure Out Which Scenario You're In
Find out the home's appraised value on the date the original owner passed away — this is your stepped-up basis.
Subtract that number from your expected (or actual) sale price.
Whatever's left is your taxable gain — that's the number the tax rates actually apply to, not the full sale price.
If you're not sure what the stepped-up basis is for a property you've inherited, a tax professional or the estate's appraisal records can help pin that down before you sell.
If you've inherited a home and want to talk through what a sale might look like — numbers included — Real Time Home Buyers Metro Detroit is happy to help you think it through. Call us at 248-509-5398.
This post is for general informational purposes only and isn't tax or legal advice. Please consult a CPA or tax professional to calculate your actual gain and tax liability.
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