Families ask it at almost every walk-through: « Will we owe tax on the money from the sale? » Estate sale companies get the second half of that question a few months later, when a Form 1099-K arrives showing every card payment taken in someone else’s house. This guide sets out how estate sale taxes work, using the IRS’s own pages and one state revenue department as an example. Each source was last checked on October 29, 2026.
The short answer: most household goods sold at an estate sale bring in less than their value on the date of death, so the heirs usually have no taxable gain on them. Items that sell for more than that value, especially art, coins and other collectibles, can create a capital gain. Separately, the company may have to collect sales tax, and card payments are reported on the company’s Form 1099-K. This is general information, not tax advice. Families should confirm their own situation with a tax professional.
Inherited items start at their date-of-death value
The number that decides whether a sale creates taxable income is the item’s basis. For inherited property, the IRS says the basis is generally « the fair market value (FMV) of the property on the date of the decedent’s death ». An alternate valuation date can apply instead, but only if the executor files an estate tax return and elects it. IRS Publication 551, Basis of Assets, covers the details, and the rule itself is in 26 U.S.C. §1014.
This is often called a « stepped-up » basis. What the deceased originally paid for the dining set in 1978 doesn’t matter. What matters is what it was worth on the date of death.
That is good news for most estate sales. Used furniture, kitchenware, linens, tools and everyday décor rarely sell for more than they were worth a few months earlier. An estate sale with markdowns on day two and day three usually sells well below that value.
When estate sale taxes apply to the heirs
The IRS rule is simple: « If you sell the property for more than your basis, you have a taxable gain. » Three related rules shape how that gain is treated.
Inherited property counts as long-term
Gains on assets held one year or less are normally short-term. Inherited property is an exception. IRS Publication 544 says that if you inherit property, « you are considered to have held the property longer than 1 year, regardless of how long you actually held it. » So a gain on an item sold a month after the funeral is still long-term.
Collectibles have their own maximum rate
Art, rugs, antiques, coins, stamps and similar items are collectibles for tax purposes, as defined in 26 U.S.C. §408(m). IRS Tax Topic 409 says « net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate. » That is higher than the top long-term rate on most other assets, so the collectibles in a house deserve the most careful valuation.
Losses on personal-use property aren’t deductible
Tax Topic 409 also says « losses from the sale of personal-use property, such as your home or car, aren’t tax deductible. » Whether an inherited item counts as personal-use property for a particular heir depends on the facts, so a family that sold valuable items at a loss should ask a tax professional before assuming either way.
Proceeds can matter even without a gain
The IRS notes that « the gross proceeds from the sale of inherited property are included in gross income when considering the need to file. » If there is a filing requirement, the sale is reported on Form 8949 and Schedule D. That is one more reason families should keep the settlement statement.
Worked example: two items, two outcomes
The values below are illustrations, not appraisals. Real date-of-death values come from an appraisal or other reasonable evidence of what the item was worth.
| Walnut dresser | Oil painting | |
|---|---|---|
| Value on the date of death (basis) | $400 | $2,000 |
| Sold at the estate sale for | $250 | $3,500 |
| Gain or loss | $150 below basis | $1,500 gain |
| Holding period | Long-term (inherited) | Long-term (inherited) |
| Tax treatment | No taxable gain | Long-term gain on a collectible, taxed at up to 28% |
The dresser is the typical case. The painting is the exception that makes it worth keeping sale-day records item by item rather than as one daily total: without a record of what each item sold for, nobody can show which sales produced a gain.
Estate tax is a different tax
People often mix up the tax on the sale with the federal estate tax. The estate tax applies to the estate as a whole, before or regardless of any sale, and only above a large threshold. For decedents dying in 2026, the IRS lists a basic exclusion amount of $15,000,000. Most estates that hold an estate sale are far below it. Some states have their own estate or inheritance taxes with different thresholds, so the executor should check the state where the decedent lived.
Form 1099-K and the company’s card sales
This is the part of estate sale taxes that lands on the company, not the family. When buyers pay by card, the payments go into the company’s merchant account, so the company is the payee that gets reported.
The IRS page Understanding your Form 1099-K explains the thresholds:
- Payment card transactions: you get a 1099-K from your card processor « no matter how many payments you got or how much they were for. »
- Payment apps and online marketplaces (third party settlement organizations): the reporting threshold is gross payments that exceed $20,000 in more than 200 transactions, though you may receive a form below that level.
A company running twenty sales a year can see a 1099-K that is several times its own commission income, because most of the money belonged to its clients. The way to reconcile it is with records: for each sale, the gross card receipts, what was paid out to the client, and what the company kept as commission and fees. Ask your own accountant how to report pass-through client funds. The point here is that the records have to exist, sale by sale.
Sales tax at estate sales
Whether sales tax applies to estate sale purchases, and who must collect it, is set by each state, and the answers differ. Some states treat a family’s one-time sale as an exempt occasional sale; others expect a professional seller to collect tax on every sale it runs.
Washington is one example of a state that spells it out. Its Department of Revenue page on estate sales says estate sellers must register because they « are required to collect and submit retail sales tax on property sold. » It then distinguishes two set-ups:
- Selling in the owner’s name: the estate seller is « generally » responsible for submitting the sales tax, and reports its commissions and fees under the service and other activities B&O tax.
- Selling in your own name: the seller reports the gross income from the property sold under both retailing B&O tax and retail sales tax.
Other states use different rules and rates, and local taxes may apply on top. Before you run a sale in a new state, read that state revenue department’s guidance or call its sales tax line, and set the correct rate in your checkout. Sales tax collected should appear on its own line in the client’s statement, because it was never the family’s money.
Why the settlement statement matters at tax time
Every rule above depends on the same records: what each item sold for, the total collected, sales tax collected and remitted, card fees, the commission and the amount paid to the family. A clear settlement statement gives the family what their tax preparer will ask for, and gives the company what it needs to reconcile its 1099-K.
A simple example of the money side, with a 40% commission and card fees passed to the client as the agreement allows (both are example terms, not industry facts):
| Line | Amount |
|---|---|
| Gross sales (before sales tax) | $18,000.00 |
| Of which paid by card | $9,000.00 |
| Commission at 40% | −$7,200.00 |
| Card processing fees, 3% of card sales (example rate) | −$270.00 |
| Paid to the family | $10,530.00 |
| Sales tax collected and remitted (separate, not client funds) | shown on its own line |
Heirsale builds that statement from the sale itself: every tagged item, every markdown, every cash and card payment, the commission terms in the client’s agreement and the payout, with each total traceable to a transaction. The commission and settlement calculator is free, and you can save the sale to send your client a statement like this one.
Heirsale gives estimates and records, not accounting, legal or tax advice. Families should confirm their tax position with a qualified professional, and companies should confirm sales tax rules with their state.
FAQ
Do you pay taxes on estate sale proceeds?
Only on the gain, if there is one. Inherited items generally have a basis equal to their value on the date of death, so most household goods sold at an estate sale bring in less than their basis and create no taxable gain. Items that sell for more than that value can create a long-term capital gain.
Who pays estate sale taxes: the heirs or the estate?
It depends on who owns the items when they are sold. If the estate sells before distributing property, the estate reports the sale; if heirs sell what they inherited, the heirs report it. The executor and a tax professional should confirm which applies.
Are collectibles taxed differently?
Yes. The IRS taxes net capital gains on collectibles such as coins and art at a maximum 28% rate, higher than the top rate on most other long-term gains.
Will the family receive a Form 1099-K?
Usually not for card payments taken by the company, because the payments go to the company’s merchant account. Card processors report payment card transactions to the payee with no minimum amount.
Do estate sale companies have to collect sales tax?
In many states, yes, but the rules differ. Washington, for example, requires estate sellers to register and collect retail sales tax. Check the revenue department of each state where you run sales.
