The amount of tax owed on an inherited house in St Simons Island is usually much smaller than heirs fear, and the reason is a single rule: an inherited home generally takes a basis at fair market value on the date of the owner death, so the taxable gain is measured from that stepped-up value rather than from what the owner originally paid decades ago (Internal Revenue Service, 2026). The computation itself is short. Gain equals the sale price, minus the stepped-up basis, minus the costs of selling. Tax is then owed on that gain, by the estate or by the heirs who receive the proceeds, depending on how the sale is structured. A prompt sale after inheritance often produces little or no taxable gain at all, because the sale price and the date-of-death value are close together. Delay, appreciation after death, and a sale price well above the stepped-up value are what create a real tax bill, and each of those can be measured before a contract is signed.

A companion report in this set, which taxes apply when selling an inherited property, mapped the categories of tax that can touch an estate sale. This report deliberately does not repeat that mapping. Its job is the amount: how the basis is set, how the gain is computed on island numbers, who writes the cheque, and which documented exclusions and closing taxes change the final figure. The island context matters to the arithmetic, because in the sample compiled for this report, 17 older homes in ZIP code 31522 averaged 23.1 percent of the price of new construction on a comparable lot, with builders acquiring 9 of the 17 (Frontier Capitals, 2026). An inherited cottage sold to a builder is priced from its lot, and that price is then compared against the stepped-up basis, not against family memory of what the house cost in 1974.

Two smaller figures belong in the same ledger from the start. Georgia transfer tax is charged at $1 per $1,000 of consideration (Georgia Department of Revenue, 2026), so it is $550 on a $550,000 sale, predictable to the dollar before closing. Sale costs, which reduce the gain, depend heavily on the route chosen: a listed sale subtracts commissions and closing costs of 6 to 8 percent in practice, while a direct sale avoids most of that subtraction but also reports a gain computed on its own price.

Inherited island cottage whose tax bill turns on its date-of-death value rather than its original price
Inherited St Simons Island cottage, showing how stepped-up basis sets the starting point for the tax computation.

Key Findings

  • Basis for a home passed down through an estate is usually reset to what the property was worth when its owner died, which is why selling soon afterward frequently leaves little gain, or none, to tax (Internal Revenue Service, 2026).
  • Gain is the sale price minus the stepped-up basis minus sale costs, and tax is owed on that gain figure, not on the full sale price.
  • Georgia transfer tax is $1 per $1,000 of consideration (Georgia Department of Revenue, 2026), which is $550 on a $550,000 sale and $325 on a $325,000 sale.
  • The Section 121 exclusion reaches $250,000 of gain for a qualifying seller, or $500,000 on a joint return, under the 2-of-5-year ownership and use tests (Internal Revenue Service, 2026).
  • On a $550,000 listed sale, commissions and closing costs of $33,000 to $44,000 reduce both the proceeds and the measured gain (National Association of Realtors, 2025).

How is the stepped-up basis set for an inherited island house?

The stepped-up basis is set at the fair market value of the house on the date of the owner death, and that single valuation does more work than any other number in the computation (Internal Revenue Service, 2026). Suppose an island cottage was bought long ago for a small fraction of its current worth, then left to two children. At the owner death, the basis steps up to what the property was worth on that date. If the property was worth $520,000 at death and the heirs sell promptly for $550,000, the gain before sale costs is $30,000, not the hundreds of thousands that a comparison with the original purchase price would suggest.

Establishing the date-of-death value is therefore the first practical task, and it is a records task. Parcel records for the island document the property and its assessed history (Glynn County Tax Assessor, 2026), and recorded deeds document the ownership chain the estate is working from (Glynn County Clerk of Superior Court, 2026). A formal valuation near the date of death is the evidence the computation later stands on, and heirs who commission it early avoid reconstructing it under pressure after a contract exists. The report on how the value of an inherited house is determined before selling works through that valuation process in full, and its conclusions feed directly into the basis figure used here.

Island pricing shapes what a prompt sale is likely to fetch against that basis. New construction on standard lots has sold in the $1,100,000 to $1,900,000 range depending on beach or marsh proximity and lot size (Redfin, 2026), and at the sampled 23.1 percent ratio an older home comparable to a $1,400,000 new build changed hands for roughly $325,000 (Frontier Capitals, 2026). The worked residual illustration, a $1,500,000 new build sale minus roughly $620,000 in construction costs and a builder margin near 20 percent, leaves residual land value near $550,000 to $650,000 before $20,000 to $35,000 in site preparation. An inherited house priced by that residual, sold soon after death at a price near its date-of-death value, will usually show a modest gain or none. An inherited house held for years while island land appreciates will show a larger one, because the basis stays fixed at the death value while the price moves.

How is the gain computed, line by line?

The gain is computed in three lines, and heirs should insist on seeing all three before anyone estimates a tax bill. Line one is the sale price actually achieved. Line two is the stepped-up basis, the date-of-death fair market value. Line three is the cost of selling, which is subtracted alongside the basis. Gain equals line one minus line two minus line three (Internal Revenue Service, 2026). Tax applies to the result, at the rate that fits the seller circumstances, and where the result is zero or negative there is no gain to tax. Publication guidance on selling a home sets out the reporting framework for this computation, including how basis and sale expenses are treated (Internal Revenue Service, 2026).

Run the computation on the island worked example. Take a sale price of $550,000 and a stepped-up basis of $520,000. On a listed route, sale costs run 6 to 8 percent in practice: commission at the typical 5 to 6 percent is $27,500 to $33,000 (National Association of Realtors, 2025), and seller-side closing costs, title, transfer tax, and prorations add another 1 to 2 percent, for a combined $33,000 to $44,000. Using the midpoint of that range as sale costs, the gain is $550,000 minus $520,000 minus roughly $38,000, which is a negative figure. No gain, no capital gains tax on the sale, and the heirs keep the net proceeds subject to the estate division. On a direct sale of the same house at the same price, sale costs are far smaller, so the measured gain is closer to the raw $30,000 difference, and a modest tax may apply to that amount.

Now vary the facts to see where a real bill comes from. If the heirs hold the house for several years and sell for $650,000 against the same $520,000 basis, the spread is $130,000 before sale costs, and tax on a six-figure gain is a genuine planning item rather than a rounding question. If the house was rented by the estate before sale, or held as an investment rather than inherited as a residence, different rules enter, including the like-kind exchange and depreciation recapture framework covered in federal guidance on asset dispositions (Internal Revenue Service, 2026).

Island lot and cottage where sale price, stepped-up basis, and sale costs decide the taxable gain
Inherited property on St Simons Island priced from its lot, illustrating the three-line gain computation.

Who owes the tax, and when does the exclusion help?

Who owes the tax depends on who sells, and the two structures produce different paperwork. If the estate sells the house during administration and then distributes cash, the gain is reported at the estate level under the estate tax reporting for the sale. If the heirs take title and sell afterwards, each heir reports a share of the gain against a share of the stepped-up basis. Either way, the total gain is the same three-line computation.

The Section 121 exclusion helps in a narrower set of inherited cases than heirs often assume. Meeting the ownership and use requirements entitles a seller to keep up to $250,000 of gain out of tax, or $500,000 if a joint return is filed (Internal Revenue Service, 2026). The tests look at ownership and use over the five years before the sale, two years of each (Internal Revenue Service, 2026). A heir who moves into the inherited house and lives there for the qualifying period may build an exclusion position. Heirs who sell promptly from out of state generally rely on the stepped-up basis instead, which is usually the larger shelter in a prompt sale anyway. The broader discussion of capital gains taxes when selling an island home covers the non-inherited version of these tests, and the contrast is instructive: for a long-held family home sold by its original owner, the exclusion does the heavy lifting, while for an inherited home the step-up does it.

Georgia transfer tax is the one figure in this report with no computation risk at all. It is $1 per $1,000 of consideration (Georgia Department of Revenue, 2026), charged as part of the seller closing ledger. On the $325,000 sale implied by the sampled ratio it is $325. On the $550,000 worked example it is $550. On a $650,000 delayed sale it is $650. Heirs comparing route costs should keep it in its proper place: real, documented, and small next to the commission line, which is why the report on closing costs when selling a house for cash separates transfer tax from the larger percentage-based charges rather than bundling them into a single vague total.

How do timing and route change the amount owed?

Timing changes the amount owed because the basis is fixed at death while the price is not. Every year an inherited island house is held, island land movement flows straight into the gain line. Holding also costs money that never appears in the tax computation: carrying costs over three to six months run $15,000 to $35,000 across mortgage or equity cost, insurance at island levels well above mainland rates, taxes, utilities, and maintenance, and those costs repeat for as long as the estate holds the property. A heir group comparing a prompt sale against a patient listing should therefore run two ledgers, the tax ledger and the carrying ledger, because a strategy that saves a small amount of tax while spending a larger amount on insurance and upkeep has the arithmetic backwards. The planning version of that comparison is laid out in the 30 day sale plan for island houses, which treats timing as a controllable variable rather than a hope.

Route changes the amount owed through the sale-cost line, as the worked example showed, and through price itself. Lot size is one of the documented levers on price: the residual discussion puts location first and lot size and buildable footprint second, in a sample with a minimum lot of 6,098 square feet, and the analysis of how lot size affects what builders pay quantifies that lever across the sample. A larger, well-located inherited lot may sell far enough above its date-of-death value to create a taxable gain even in a prompt sale, and heirs should welcome the computation rather than fear it: tax on a gain means the estate received more money, and the gain line, not the price line, is what is taxed.

One more timing fact deserves emphasis because it reverses the usual instinct. Heirs sometimes assume that renovating an inherited house before sale will be rewarded in the tax computation as well as the price. The documented renovation illustration spends $75,000 updating a 1968 cottage and finds a likely price lift of $50,000 to $65,000 for a live-in buyer and nothing where the buyer acquires the lot.

How do the five off-market benefits apply to an inherited house tax position?

The five benefits apply to an inherited house by protecting the favourable tax position the step-up creates. Privacy comes first. Selling directly keeps the home unshown, avoids any open house, skips public marketing altogether, and keeps the transaction off the public record until the deed transfers.

Flexible closing comes second, and it is the benefit with a direct tax effect. A direct sale can close in 7 to 21 days when speed matters, or months out with a leaseback, against 60 to 120-plus days for a listed older island home. Closing near the date-of-death value keeps the sale price close to the stepped-up basis, which is precisely where the gain stays small. No commissions comes third. Avoiding the typical 5 to 6 percent commission keeps $27,500 to $33,000 of a $550,000 price in the estate (National Association of Realtors, 2025). No seller closing costs comes fourth, removing the further 1 to 2 percent so the combined saving reaches $33,000 to $44,000 on that example, although heirs should note the trade-off shown earlier: lower sale costs mean a slightly higher measured gain, and the net still strongly favours the saving. No inspections or repairs comes fifth, removing the $10,000 to $25,000 repair credits negotiated at inspection on older island inventory, and removing the renovation temptation entirely.

In its wholesale role Frontier Capitals supplies builders with off-market deals and buys property directly from sellers. It does not present itself as a builder. Verification follows the documented standard: proof of funds in the buyer name dated within the last 30 days, and recorded deeds in the buying entity name from purchases that actually closed, checkable in county records (Glynn County Clerk of Superior Court, 2026).

Established island street where an inherited house can sell promptly near its stepped-up value
Established St Simons Island street, where a prompt inherited sale keeps price close to the date-of-death basis.

Methodology and limitations

For this report the research base is 17 older homes sampled in 31522, with 9 purchases by builders (Frontier Capitals, 2026). The basis rule and exclusion figures rest on federal tax guidance (Internal Revenue Service, 2026), including the publication guidance on selling a home, the topic guidance on the $250,000 and $500,000 exclusion and the 2-of-5-year tests, the guidance on basis for inherited property, and the guidance on asset dispositions and like-kind exchanges (Internal Revenue Service, 2026). The transfer tax rests on state guidance (Georgia Department of Revenue, 2026), commission figures on national profile research (National Association of Realtors, 2025), new construction ranges on island market records (Redfin, 2026), and parcel and deed context on county records (Glynn County Tax Assessor, 2026) and (Glynn County Clerk of Superior Court, 2026).

The limits must be stated plainly. The worked figures in this report are illustrations built from the documented $550,000 example and the documented basis rule, not a tax assessment for any specific estate. Individual liability depends on the actual date-of-death value, the actual sale price and costs, how the sale is structured between estate and heirs, and each taxpayer circumstances, and rates themselves are not published in this set of materials, so no rate is quoted here. Nothing in this report is tax advice. An estate with a six-figure spread between basis and price should have the computation run by its own accountant before a closing date is set.

Conclusion

The tax owed on an inherited St Simons Island house is computed, not guessed: sale price, minus a basis stepped up to fair market value at the owner death, minus sale costs, with tax on the remainder and Georgia transfer tax of $1 per $1,000 added to the closing ledger (Georgia Department of Revenue, 2026). On the documented island numbers, a prompt sale near the date-of-death value commonly leaves little or no gain to tax, while delay, appreciation, and renovation spending are what turn a sheltered sale into a taxable one. Heirs who establish the basis early, run the three-line computation for each route, and close while the price still resembles the basis will know their figure before they sign anything.

Owners who want a prompt, documented valuation of an inherited island house while its basis is still fresh can telephone Frontier Capitals at 401-219-4207 or email [email protected].

Given that the stepped-up basis is at its most powerful right after inheritance, what is the case for waiting to sell at all?

Frequently Asked Questions

Is tax owed on the full sale price of an inherited house?

No. Tax is owed on the gain, which is the sale price minus the stepped-up basis minus sale costs (Internal Revenue Service, 2026). Because the basis is set at fair market value on the date of the owner death, the gain on a prompt sale is often small or zero, even where the sale price itself is large.

What is the Georgia transfer tax on an inherited house sale?

It is $1 per $1,000 of consideration (Georgia Department of Revenue, 2026). That is $550 on a $550,000 sale and $325 on a $325,000 sale. It is part of the seller closing ledger and is separate from any tax on the gain.

Does the Section 121 exclusion apply to inherited property?

It can, where the seller meets the ownership and use tests, which look for two years of each within the five years before sale, with an exclusion of up to $250,000, or $500,000 on a joint return (Internal Revenue Service, 2026). Most prompt estate sales rely on the stepped-up basis instead, because the heir has not lived in the house for the qualifying period.

Who pays the tax if the estate sells before distributing proceeds?

If the estate sells during administration, the gain is reported at the estate level, and the net proceeds are then divided under the will or Georgia intestacy law. If the heirs take title and sell afterwards, each heir reports a share of the gain. The three-line gain computation is the same in both structures.

Can sale costs really change the tax owed?

Yes. On a $550,000 listed sale, commissions and closing costs of $33,000 to $44,000 are subtracted in the gain computation as well as from the proceeds (National Association of Realtors, 2025). Higher sale costs produce a lower measured gain and lower proceeds, while a direct sale produces a higher measured gain and higher proceeds. The comparison belongs on net-after-tax figures.

Sources

  • Frontier Capitals, 2026. 189 neighborhood builder acquisition sample: 17 homes sampled in 31522, 9 acquired by builders, average older home price 23.1 percent of new build. Market data.
  • Internal Revenue Service, 2026. Sale of residence: real estate tax tips: basis rules for inherited property. Government data.
  • Internal Revenue Service, 2026. Publication 523: Selling Your Home, Section 121 exclusion rules. Government data.
  • Internal Revenue Service, 2026. Topic 701, sale of your home: $250,000/$500,000 exclusion and 2-of-5-year ownership and use tests. Government data.
  • Internal Revenue Service, 2026. Publication 544, Sales and Other Dispositions of Assets: like-kind exchange rules and depreciation recapture. Government data.
  • Georgia Department of Revenue, 2026. Real estate transfer tax: $1 per $1,000 of consideration. Official record.
  • National Association of Realtors, 2025. Highlights from the Profile of Home Buyers and Sellers. Industry report.
  • Redfin, 2026. Recently sold homes and new construction, ZIP code 31522, St. Simons Island GA. Market data.
  • Glynn County Clerk of Superior Court, 2026. Recorded deeds and plat records for 31522. Official record.
  • Glynn County Tax Assessor, 2026. Parcel and permit records, St. Simons Island GA. Official record.