Inherited a Denver Home: Keep, Rent or Sell? The Money Math

Selling an inherited Colorado home within a year of the owner's death costs almost nothing in tax, because the home's tax basis resets to its market value on the date of death. On a Denver metro home worth $600,000, an heir who sells at $610,000 owes capital gains tax on $10,000, not on the $450,000 the parents gained since 1995. That one rule drives the keep, rent or sell decision, and it is where this guide starts.

Below: the stepped-up basis, tax on the sale, the fix-or-sell-as-is math for an older Front Range home, what renting returns, how siblings split or buy each other out, and a short close on how to sell. The legal path, from probate court and Letters to the personal representative's deed, is in the companion post on Colorado probate, title and selling steps for an inherited home.

Do I pay capital gains tax on an inherited house in Colorado?

Only on the gain above the date-of-death value. Federal law resets the basis of inherited property to its fair market value on the day the owner died. Gain on inherited property is treated as long-term no matter how long you hold it, so the federal rate is 0%, 15% or 20% depending on your income, plus the 3.8% net investment income tax above $200,000 of income for a single filer or $250,000 for a joint return. Colorado taxes the same gain as ordinary income at its flat rate of 4.4%.

• Sell within 12 months at market value: gain of $0 to $25,000 after selling costs on most Denver metro homes, and tax of $0 to $6,000.
• Hold 5 years, then sell: the gain is the appreciation after death. At the Front Range's long-run 4% to 5% a year, that is $130,000 to $165,000 on a $600,000 home.
• The $250,000 / $500,000 home-sale exclusion applies only when you owned and lived in the home as your main residence for 2 of the 5 years before the sale. An heir who never moved in does not get it. An heir who moves in for 2 years does.

Colorado has no estate tax and no inheritance tax, and the federal estate tax starts at $15 million per person in 2026, so the capital gains rules above are the whole tax picture for nearly every Colorado estate. For the downsizing version of the same rules, read our post on the tax implications of downsizing in Colorado.

How do I document the stepped-up basis?

Order a date-of-death appraisal from a Colorado-licensed appraiser within 6 months of the death. It costs $450 to $750 in the Denver metro and is the document the IRS accepts; a Zillow estimate is not. Keep it with the estate records, because if you rent the home it is also the number depreciation runs from. The Smart Pricing Report from the Kenna Real Estate Group sets the list price from sold comps; the appraisal sets the tax basis. You need both.

Fix it up or sell it as-is?

One rule: do a repair when it returns at least $1.50 at closing for every $1.00 spent, or when leaving it undone knocks the home out of financing. Everything else gets priced in. On a Front Range home built between 1955 and 1990:

The pattern: spend $8,000 to $18,000 on the first four rows and stop. The adding-value guide ranks every other project, and our post on the as-is sales process in Denver explains how the Colorado contract lets a seller sell as-is while the buyer still inspects.

Is renting out an inherited Denver home worth it?

Run the numbers on a $600,000 Centennial or Arvada house with no mortgage:

• Rent: $2,800 to $3,400 a month for a 3-bedroom single-family home in 2026.
• Costs: property tax $3,000 to $4,500 a year, landlord insurance $2,000 to $3,500, maintenance 1% of value ($6,000), management 8% to 10% of rent ($3,000 to $4,000), one month of vacancy a year.
• Net: $17,000 to $23,000 a year before income tax, a 2.8% to 3.8% return on $600,000 of equity, plus appreciation.

Keep it as a rental when three things are true: it needs less than $15,000 of work to pass a rental inspection, you or a manager can reach it in an hour, and you do not need the equity for anything that earns more than 4%. Denver requires a residential rental license with a third-party inspection for every long-term rental, and Colorado's 2023 to 2025 landlord laws cap the security deposit at two months of rent and set warranty-of-habitability repair deadlines. Depreciation runs from the stepped-up basis over 27.5 years, and a later sale pays 25% recapture on it unless you do a 1031 exchange. Our Colorado rental property checklist and tax-smart strategies for Colorado investors carry the detail.

What does it cost to hold the home while you decide?

A vacant Denver metro home costs $900 to $1,800 a month with no mortgage (tax, vacant-home insurance, Xcel, water, HOA, snow and lawn) and $2,500 to $4,500 with one. Six months of indecision costs $6,000 to $27,000. Set a 90-day deadline from the date the Letters issue.

How do siblings split an inherited house?

Three ways, in the order that works most:

1. Sell and split the net. The estate sells, pays creditors and costs, and the personal representative distributes the balance by the will or by Colorado's intestacy shares. Clean and final.
2. One sibling buys the others out. Use the date-of-death appraisal or a new one as the price. The buying sibling pays cash or takes a mortgage for the others' shares, and the personal representative deeds the home to the buyer. The buyout is a purchase, so the buying sibling's basis is the price paid for the shares bought plus the stepped-up basis on their own share.
3. Keep it together as a rental. Works only with a written agreement on who manages, how costs split, and what triggers a sale. Without one, the first missed repair bill ends in a partition suit in district court that forces a sale and costs $10,000 to $30,000.

A sibling who needs a loan for the buyout talks to Mike Oswald, VP of Mortgage Lending at Rate, NMLS 261003, Equal Housing Lender, who runs the numbers for our clients. You are free to use any lender. The Colorado home financing guide covers the paperwork a buyout loan needs.

What happens to the mortgage or reverse mortgage?

• Regular mortgage. A relative who inherits keeps paying the existing loan at its existing rate; federal law stops the lender from calling it due, and the servicer must recognize a confirmed successor in interest. Keep it current from the first month.
• Reverse mortgage. The loan comes due at death. Heirs get 30 days from the lender's notice to state a plan and up to 6 months, with extensions, to sell or pay the lesser of the loan balance or 95% of the appraised value. Miss the window and the lender forecloses. This is the one inherited home where fast matters more than price.
• Underwater loan. When the payoff exceeds the home's value, the estate sells short or lets the lender take it; heirs are not personally liable for a loan they did not sign. Our distressed homes guide covers short sales and liens.

Cash offer or list it?

A cash investor pays 70% to 85% of market value and closes in 7 to 21 days with no repairs or showings. A listed Denver metro home goes under contract in 10 to 30 days and closes 30 to 40 days later at full value. On a $600,000 home the gap is $90,000 to $180,000. Take the cash offer when the reverse-mortgage clock is running, the home fails financing, or the estate has creditor deadlines it cannot meet. List it in every other case. Our post on when selling to a Denver cash buyer makes sense gives the decision by scenario, and the Denver cash home buyers page explains how the group gets several offers instead of one. Out-of-state property runs on that state's local market: a Grand Rapids house, for example, goes to a local buyer such as Lakeshore Home Buyer, whose page on how to sell your house in Grand Rapids Michigan covers that market, while the Colorado numbers here govern the Colorado house.

What does the sale cost?

On a $600,000 Colorado sale: 4% to 5.5% in brokerage commissions ($24,000 to $33,000), $1,500 to $3,000 in title and closing fees, a $60 Colorado documentary fee, prorated property tax and an HOA transfer fee of $150 to $500. Net proceeds go into the estate account first. The net proceeds guide shows the full sheet.

When is the best time to sell on the Front Range?

Homes listed between March 1 and May 31 in the Denver metro sell 10 to 20 days faster and 2% to 4% higher than the same homes listed in November through January. An estate home that reaches sellable title in October is listed in October anyway when it is vacant and costing $1,500 a month; the carry cost eats the spring premium.

How to sell it, in five steps

1. Confirm who has authority to sign using the probate and title guide.
2. Order the date-of-death appraisal and a Smart Pricing Report.
3. Do the cleanout, paint, radon and sewer scope; leave the rest.
4. List on the MLS as-is, or collect three cash offers when the deadline rules.
5. Close through a Colorado title company and distribute from the estate account.

The Colorado Home Seller's Guide and the seller services page cover each step in full.

Where to go next

• Inherited a Colorado home? Probate, title and selling steps
• What to do with an inherited house in Denver if you do not want to keep it
• Get a Smart Pricing Report on the home
• Colorado real estate investing guide
• Search every home for sale in Colorado
• Meet the Kenna Real Estate Group agents

Talk to the Kenna Real Estate Group

The group gives heirs the sell, rent and buyout numbers on one page, from sold comps and current Denver metro rents, then lists the home as-is or brings three cash offers when the clock rules. Call or text 303-955-4220. A live person answers. Not a robot, not a phone tree. When the proceeds are in hand, search every home for sale in Colorado.