Inherited Out Of State

Buying another home has nothing to do with the question of tax on what you inherited from your father. Your cost basis for that property is its value when you inherited it, plus anything you've spent on permanent improvements (not repairs or redecorating) since then. To find out if you have any taxable profit, subtract cost basis from the sale price, and also subtract any real estate commissions and legal costs of selling. What's left, if anything, would be taxable at long-term capital gains rates, no more than 15 percent federal. If you have been renting the property out, things get more complicated and you'll need professional help with your tax return.