Georgia Real Estate Sale: Capital Gains Tax

Quick answer: most probate house sales owe little or no capital gains tax, because the house's tax basis steps up to its value on the date of death. Any gain that does exist is taxed as ordinary income at Georgia's flat 4.99% rate, on top of whatever federal tax applies. See how the numbers change for your own sale in the Georgia probate real estate sale calculator.

Why most probate sales owe little or nothing

The rule that does the real work: under federal law (IRC § 1014), an inherited house's tax basis resets to its fair market value on the date of the original owner's death, instead of carrying over what that owner originally paid. Sell the house soon after death, at close to that same value, and the taxable gain is small or zero — tax applies only to appreciation that happens after the date of death, not the decades of appreciation that came before it.

A worked example

	Amount
Original purchase price (decades ago)	$80,000
Fair market value on date of death (stepped-up basis)	$300,000
Sale price, 4 months after death	$305,000
Taxable gain	$5,000
Georgia tax on that gain (4.99%)	≈ $250

Illustrative example. The $220,000 of appreciation that happened before death is never taxed, because of the stepped-up basis.

Georgia's own rate, once there's a real gain

Whatever gain does survive the stepped-up basis gets taxed as ordinary income under Georgia's flat individual income tax rate, 4.99% for 2026 under O.C.G.A. § 48-7-20. Unlike the federal system, Georgia doesn't offer a lower rate for long-term gains — a gain held one month and a gain held twenty years are taxed identically at the state level.

If an heir moves in first

The federal Section 121 home-sale exclusion — which Georgia follows — can shelter up to $250,000 of gain for a single filer, or $500,000 for a married couple filing jointly, if the seller owned and lived in the home as a primary residence for at least two of the five years before the sale. That's a meaningfully different scenario from the estate selling the house directly without anyone living in it first.

Who actually reports the gain

Whoever sells and realizes the gain reports it. If the estate itself sells the house before distributing it to heirs, the estate reports the gain on its own fiduciary income tax return. If the house is distributed to an heir first and that heir later sells it, the heir reports the gain individually — still measured against the same stepped-up basis from the date of death, not whatever it's worth by the time they sell.

Georgia's 4.99% flat rate applies the same in Chatham County (Savannah) as it does in Fulton County (Atlanta) — state income tax doesn't vary by county.

Facing probate in Georgia?

A local probate attorney can review your estate — many offer a free consultation.

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Capital gains tax on the sale — frequently asked questions

What is the stepped-up basis on an inherited Georgia house?

The house's federal tax basis resets to its fair market value on the date of the owner's death, rather than what the original owner paid for it. Selling soon after death, at close to that value, typically produces a small taxable gain or none at all — tax applies only to appreciation after that date.

What rate does Georgia tax the gain on a probate house sale?

Georgia taxes capital gains as ordinary income at its flat 4.99% rate for 2026 (O.C.G.A. Section 48-7-20), with no separate, lower rate for long-term gains the way federal law provides.

Does the federal home-sale exclusion apply to an inherited Georgia house?

It can, if an heir moves in and meets the federal ownership-and-use test — generally living in the home as a primary residence for at least two of the five years before selling — which can shelter up to $250,000 of gain for a single filer or $500,000 for a married couple, and Georgia follows this federal exclusion.

Does the estate or the heirs owe the tax on a probate house sale?

Whichever one actually sells the property and realizes the gain. If the estate sells before distributing the house, the estate reports the gain on its own income tax return; if the house is distributed first and an heir later sells it, the heir reports the gain individually, still measured against the stepped-up basis.

Is Georgia's capital gains tax separate from the state's estate or inheritance tax?

Yes, and it's the only one of the three that actually applies. Georgia has no estate tax and no inheritance tax, so the flat 4.99% income tax on any taxable gain from the sale is the only Georgia-specific tax question a probate real estate sale typically raises.

This page provides general guidance only and is not legal, tax, or financial advice. Based on O.C.G.A. § 48-7-20 and federal Internal Revenue Code § 1014, § 121. Actual tax owed depends on the estate's or heir's full tax situation. Confirm current figures with a CPA or a licensed Georgia attorney before acting.

Capital Gains Tax on a Georgia Probate Real Estate Sale