Tax Implications and Personal Factors

The decision extends beyond mortgage math, involving significant tax and personal considerations that can influence the final choice.

Capital Gains and Inheritance

Taxation is a critical financial factor.

An inherited property typically benefits from a "stepped-up basis." This sets its cost basis to the fair market value at the time of inheritance, which can minimize or even eliminate capital gains tax if the property is sold quickly.

Selling a primary residence, however, is subject to a capital gains exclusion of up to $250,000 for single filers and $500,000 for joint filers. Any profit above that threshold is taxable.

Lifestyle Considerations

Non-financial factors often play a deciding role.

• Emotional Attachment: The sentimental value of a long-time family home can outweigh purely financial arguments.

• Location: The proximity of each property to work, schools, and community is a critical factor.

• Property Condition: The inherited home may require repairs or updates, adding to its true cost and influencing the decision.