• calendar_month March 24, 2025
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When selling a home, capital gains tax can take a significant bite out of your profits. However, married couples in California and other community property states can minimize or even avoid this tax burden by how they hold title to their property.

Community Property & the Step-Up in Basis
Holding title as community property allows a surviving spouse to benefit from a full step-up in basis upon the other spouse’s passing. This means the home’s value is adjusted to its fair market value at the time of death, reducing or eliminating capital gains tax when the surviving spouse sells.

Community Property with Right of Survivorship
This form of ownership offers the same tax benefits as community property but adds the convenience of automatically transferring ownership to the surviving spouse without probate. This can save time, legal fees, and stress for the surviving partner.

Joint Tenancy Increases Unnecessary Tax Liability

It's a fact that most married couples choose joint tenancy. This form of ownership increases your tax liability upon the death of one spouse, their share automatically passes to the surviving spouse without probate. This leads to a partial step-up in basis for tax purposes, meaning capital gains taxes may be owed on the surviving spouse's share when the property is sold, but not on the deceased spouse's share.  

By strategically choosing how to hold title, homeowners can protect their assets and reduce tax liabilities. If you're unsure about your best option, consulting a tax professional or estate planner is always advisable. As your real estate expert, I’m here to guide you through these important decisions. Reach out today!