Taxes on Inherited Property in Texas: What Heirs Owe

Short answer

Property taxes keep accruing after a death, and a new tax lien attaches every January 1. An heir who lives in the house can claim the homestead exemption as an heir property owner. For income tax, your basis is generally the home's value on the date of death, so only later gain is taxed.

An inherited house brings two kinds of tax questions. The first is local: the property tax bill that keeps arriving whether or not anyone has opened probate. The second is federal: what happens to your income tax when you sell. Texas law answers the first, and IRS publications answer the second.

This guide covers both at the statewide level. For appraisal district and tax office steps in Tarrant, Dallas, Collin and Denton counties, see our DFW guide to taxes on inherited property. This is general information, not tax advice; a CPA can apply it to your numbers.

Property taxes do not pause when an owner dies

Texas property tax is tied to the land, not to the person. Under Tax Code Sec. 32.01, a tax lien attaches to the property on January 1 of each year to secure that year's taxes, penalties and interest. The lien follows the house to whoever owns it next, including heirs and buyers.

The calendar is the same for everyone. Under Sec. 31.02, taxes are due when the bill arrives and become delinquent if not paid before February 1 of the following year. Then Sec. 33.01 adds the cost of waiting:

Texas penalty and interest on delinquent property tax (Tax Code Sec. 33.01)
Charge	How it builds
Penalty	6 percent for the first month, plus 1 percent for each added month before July 1; a flat 12 percent once the tax is still unpaid on July 1
Interest	1 percent for each month or part of a month, for as long as the tax stays unpaid

Taxing units can also add a collection penalty under Sec. 33.07 for taxes still delinquent on July 1. An estate that sits for a year or two with no one paying can build a large balance, and that balance comes out of the sale price later.

What happens to the owner's exemptions

Exemptions belong to qualified owners, not to the house. Sec. 11.42 sets eligibility by the owner's status on January 1. A few rules soften the year of death:

Over-65 or disabled owner. Sec. 26.112 says that if a qualifying owner owned the home at any time during the tax year, the tax for that year is figured as if they qualified for the whole year. The year of death keeps the benefit.
No mid-year proration for homesteads. Sec. 26.10(a), which prorates taxes when an exemption ends mid-year, excludes residence homestead exemptions.
Surviving spouse. If the deceased spouse had the 65-or-older exemption and the surviving spouse was 55 or older at the death, the survivor can keep the local 65-or-older exemption (Sec. 11.13(q)) and the school tax ceiling (Sec. 11.26(i)), as long as the home was and remains the survivor's homestead. Under Sec. 11.43(m-2), the appraisal district can carry that forward without a new application if its records show the spouse is eligible.

For children and other heirs, the parent's exemptions end. The house is taxed without them starting the next January 1 unless an heir qualifies in their own right.

Heirs who live in the house can claim it as heir property

Texas made this easier for families who inherit without a probate case. Tax Code Sec. 1.04 defines "heir property" as real property acquired by will, transfer on death deed or intestacy, owned by one or more people at least one of whom claims it as a homestead, whether or not the heirs' interests are recorded. The heir who lives there is the "heir property owner."

What the application must ask an heir for (Sec. 11.43(o)-(o-2)): an affidavit establishing the heir's ownership interest, a copy of the prior owner's death certificate, the most recent utility bill for the property, and a citation to any court record on ownership if one exists. Each other heir who also lives there signs an affidavit authorizing the application. The form may not require a recorded deed.

Two more rules matter. Sec. 11.13(h) treats a qualifying heir property owner as the sole recipient of the exemption, so the exemption is not cut down to that heir's fractional share. And Sec. 11.49 says granting or denying the exemption does not change title. The application is a tax filing, not a substitute for probate or an heirship case.

The dollar amounts are the standard ones. Sec. 11.13(b) gives a $140,000 school district exemption on a homestead, and Sec. 11.13(c) adds $60,000 for an owner who is 65 or older or disabled. Applications are generally due before May 1 (Sec. 11.43(d)), and Sec. 11.431 lets the appraisal district accept a late homestead application filed up to two years after the delinquency date. The Comptroller's exemption page has the current forms.

If the owner had deferred the taxes

Some older or disabled homeowners file a deferral affidavit under Sec. 33.06 and stop paying while they live in the house. The taxes are not forgiven. The lien stays, and interest runs at 5 percent a year during the deferral. Once the owner no longer owns and occupies the home, the taxing units may not sue or hold a tax sale until the 181st day after they deliver a delinquency notice. A surviving spouse who was 55 or older at the death can continue the deferral if the home was both spouses' homestead (Sec. 33.06(f)). Heirs who inherit a deferred account should ask the tax office for a payoff early. That number can be large.

Federal estate tax reaches very few families

The IRS publishes a filing threshold for each year of death. An estate tax return is required only when the gross estate, plus certain lifetime gifts, is above that line: $13,990,000 for deaths in 2025 and $15,000,000 for deaths in 2026. Most inherited houses are nowhere near that, so the more common federal question is income tax when the house is sold.

Your starting point for income tax: a stepped-up basis

IRS Publication 551 says the basis of inherited property is generally its fair market value on the date of death, or on the alternate valuation date if the estate's personal representative elected it. Publication 523 adds that if an estate tax return was filed or required, the value on that return is your basis. If the executor sends you a Schedule A (Form 8971), Publication 551 says certain beneficiaries must use the value reported there.

Texas is a community property state, and Publication 551 lists it by name. When a spouse dies, the whole community property interest, including the survivor's half, generally gets a new basis at fair market value, provided at least half of it is includible in the gross estate. That can reset the basis for a surviving spouse as well as the children.

Get a written appraisal as of the date of death. It is the number everything else is measured against.

Selling the inherited house: gain, loss and paperwork

Gain or loss is the amount realized minus your basis. Publication 523 treats selling expenses such as commissions and legal fees as reductions of the amount realized.
Holding period. Publication 544 treats inherited property as held for more than one year, so a gain is long-term no matter how quickly you sell.
Reporting. Publication 523 walks through reporting a sale on Form 8949 and Schedule D, and says you may need Form 8949 when the closing produces a Form 1099-S.
Losses depend on how the house was held. Publication 544 says a loss on personal-use property is not deductible. Publication 559 treats a house the estate holds for sale as investment property, so a loss on the estate's sale may be deductible. Ask a CPA which rule fits your facts.
Moving in. An heir who makes the house a main home may later qualify for Publication 523's exclusion of up to $250,000 of gain ($500,000 for a married couple filing jointly) after meeting its ownership and use tests.

Selling with tax balances still open

Past-due property taxes are usually paid from the sale proceeds at closing, along with the current year's share. When Cash Home Advisors buys an inherited house, we pay all closing costs and can close in 7–14 days. Any tax payoff appears on the closing statement, which you see before you sign.

Request a cash offer, see how a sale with us works, or read our guide to selling an inherited house in Texas. Related guides are in our inherited and probate section, including what happens when heirs disagree.

Want a cash offer instead?

We buy Texas houses as-is, pay all closing costs, and can close in 7–14 days.

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Frequently asked questions

Do property taxes on an inherited Texas house have to be paid before probate is finished?

The taxes do not wait for probate. Tax Code Sec. 32.01 attaches a lien to the property every January 1, and Sec. 31.02 makes the bill delinquent if it is not paid before February 1 of the next year. After that, penalty and interest accrue under Sec. 33.01 whether or not an estate has been opened.

Can heirs keep a parent's over-65 exemption?

For the year of death, Tax Code Sec. 26.112 figures the tax as if the parent qualified for the whole year. After that, eligibility is set by each owner's own status on January 1. A surviving spouse who was 55 or older at the death can keep the 65-or-older exemption and the school tax ceiling if the home stays the spouse's homestead (Secs. 11.13(q) and 11.26(i)). Children and other heirs must qualify on their own.

Do heirs owe federal estate tax on an inherited house?

Only large estates file. The IRS says an estate tax return is required when the gross estate, plus certain lifetime gifts, exceeds the filing threshold for the year of death: $13,990,000 for 2025 and $15,000,000 for 2026.

What is my tax basis in an inherited house?

IRS Publications 551 and 523 say it is generally the fair market value on the date of death, or the alternate valuation date if the estate elected it. If an estate tax return was filed and you received a Schedule A (Form 8971), you may be required to use the value reported there.

Sources

General information, not legal or tax advice. Talk to a Texas attorney or CPA about your situation.