Widows, Do You Have to Pay a Capital Gains Tax If You Sell Your House After the Death of Your Spouse?

Examining Money IssuesIf your husband has recently passed away, you may decide it’s time to sell your home. Maybe it holds too many sad memories, or it’s just too big for you to handle on your own, or you simply want to live closer to your children.

Whatever your reason, if your house has increased in value over the time that you’ve owned it, then you might worry that selling your house will set you up for a big tax bill from Uncle Sam, thanks to capital gains tax.

A Quick Review of Capital Gains

Whenever you sell an asset, such as a home, for more than you paid for it, the difference is the capital gain. So, let’s say that you purchased your home in 1992 for $300,000 and today that same home is worth $600,000. (Good job!) If you sold the home for $600,000, your capital gain would be $300,000.

It should come as no surprise to you that Uncle Sam wants to take his share of your newfound wealth. Depending on your current tax bracket, you could be asked to pay a capital gains tax of 0% – 20% on the capital gains from your home’s sale.

Before you start writing your congressperson in outrage, there are ways that you can avoid or at least dramatically lower your capital gains tax burden. Let’s look at four ways to save you some major money.

The Capital Gains Tax Exemption

The first and easiest way to lower your capital gains burden is to take advantage of the capital gains tax exemption. For singles, the current exemption is $250,000. That means that the tax won’t apply to the first $250,000 of your capital gains.

This is great news if your house hasn’t appreciated more than $250,000. However, many seniors have lived in their homes for decades, which means the property could have increased significantly in value since they first purchased the house.

Sticking with our original example, if you sold your home for $300,000 more than what you bought it for, you would face capital gains taxes on $50,000 ($300,000 – $250,000).

The capital gains tax exemption only applies if you:

  • Are selling your primary residence,
  • Have owned your home for at least two years,
  • Have lived in your home for two of the past five years

Exclude Home Improvements

The government lets you deduct money that you’ve invested into your home from your home’s sale price when you report capital gains. For example, let’s say that you spent $50,000 on a kitchen remodel in 2005 and then added a granny flat on the property for $75,000 in 2014. In total, you’ve spent $125,000 on major home improvements, which you can deduct from the sale price of your home.

Even though your home sold for $600,000, in essence, it really sold for $475,000 ($600,000 – $125,000). Now, the capital gain on your home is only $175,000 ($475,000 – $300,000), which is within the capital gains tax exclusion. In this scenario, you wouldn’t have to pay any capital gains on your property.

Low Income Tax Bracket

The percentage of the capital gains tax you will face when you sell your home will depend on your yearly income, including the capital gains. Here is how the taxes on income break out for single individuals in 2016. (These numbers will change from year to year):

  • $0 – $37,650 in yearly income = 0% capital gains
  • $37,650 – $415,050 in yearly income = 15% capital gains
  • $415,050+ in yearly income = 20% capital gains

As you can see here, as long as you keep your income below $37,650, including capital gains, you won’t have to worry about capital gains taxes at all. If you are earning $50,000 this year but are planning to retire next year, if you have taxable capital gains, it might be worth it to wait until next year to sell your home when you’ll be earning far less and part of your capital gains will be taxed at a lower rate, or not at all.

Step-Up Basis After the Death of a Spouse

As a recent widow, you have one more card to play to beat capital gains tax. In all likelihood, you and your husband owned your home jointly (both of your names were on the deed) or there was a built-in right-of-survivorship. What this means is that when your husband died, his half of the home went to you.

Something else happened during that transfer that most homeowners don’t realize. Your husband’s half of the home transferred to your ownership on a stepped-up basis. When he died, his portion of the house updated (or stepped up) to the current fair market value of the home.

In our example, you purchased your home with your husband for $300,000. Let’s say that on the day your husband died, your home was worth $550,000. When his half of the home transfers to you, it isn’t worth $150,000 (half of your original purchase price); rather it is worth $275,000 (half of the current fair market value of $550,000). When you sell your home next year for $600,000, the capital gain is NOT $300,000. It is $175,000. How did we come up with that number?

Your half of the house is still at its original tax basis of $150,000 (half of the original $300,000 purchase price), but your husband’s half of the house stepped up to $275,000 when he died (half of the house’s value on the day he died of $550,000). Add $150,000 to $275,000, and you get $425,000 as the tax basis of your home. Subtract $425,000 from the $600,000 sales price, and your capital gain on the sale is $175,000.

That’s a lot of math, but the point is that $175,000 is below the capital gains tax exemption, which means you won’t have to pay any capital gains tax!

Many widows do not know about this rule, and so they don’t report the stepped-up value from their husband’s portion of the house when they sell the house. Don’t make this mistake. It could mean the difference between paying a big capital gains tax on the sale of your house or paying nothing at all!

Want to learn even more ways to save as a widow? Our article library just for widows includes useful articles on topics like Tax Breaks for Widows and more!

261 thoughts on “Widows, Do You Have to Pay a Capital Gains Tax If You Sell Your House After the Death of Your Spouse?”

  1. If a husband and wife own their home together for 45 years and the husband dies, I thought that the widow only has 2 years from the date of death to take advantage of the $250 tax free gain from the husband’s side of the transaction. A total of $500,000 in tax free gain. What happens if the property closes after the 2 year anniversary? Is there a penalty? How much time does the widow have to sell and close after the date of death? Thank you!

    1. At the date of his death, the property gets a step-up in tax basis to the value at the date of his death. So when you sell, you’ll have to pay tax on the difference between what is sells for, net of the cost of sale, and the value at the date of his death. That is likely to be very little.

      1. Can you address the question from Karen about the primary home selling more than 2 years after the death? Does one still get the 250k exemption?

        1. I’m not sure what the question is. If someone dies, their property gets a stepped-up basis to the value at the date of their death, which means that when the property is sold, the only thing that is taxable is the increase over the value at the date of death, which likely is very little. A dead person cannot claim a $250,000 exclusion from capital gains.

          1. I was told that the 2 years applies to the stepped-up component. For example after 2 years taxation on 300 verses 25.

            550(house value) – 250(capital gains exemption) – 275(stepped-up) = 25 to be taxed.
            if after 2 years the step-up goes away it is 550-250 = 300 taxable?

            Can you tell me which it is?

          2. I think they are referring to the rule that if you sell your home within two years of the death of your spouse, the maximum exclusion is $500,000, not $250,000.

          3. Surviving spouses may exclude $500,000 of home-sale profits from taxes if they sell the house within two years of their spouse’s death, as long as they owned and lived in the house for two of the five years before the spouse died.

        2. Hello my husband died on 1918 and I am selling the house because I can’t continue pay the Insurance and others bills .
          since I perched the house I expected $20,000 currently I’m selling the house for $275,000 but I will received $ 254,000 can you help me I don’t know what to do
          Thank you Gliceria M
          You can call or send me a message thank you (7744041495)

          1. When you sell the home, the escrow company will give you a form to sign saying that your gain is less than the $250,000 capital gain exclusion you can claim because it was your principal residence. That means you won’t even have to report the sale on your tax return. When you get the funds, put them into a savings account until you can get together with a financial advisor or knowledgeable friend to figure out your budget for the future, how much you’ll get in from income and how much you’ll need to draw from these funds (if any). That will let you decide how much of these funds to keep liquid for future needs and how much to invest for the future years from now.

  2. What if the house is only in the wife’s name and the husband dies? They will be filing a final joint return this year. Does it make sense from a tax perspective to sell the house this year? Is there any tax benefit (can they claim $500k tax-free) or does she only get the $250k tax-free gain?

    1. If was owned by him and was part of his estate, then it does gets a “stepped-up basis” to the value at the date of his death, which means that becomes their tax basis and the only gain reportable is any increase from that value. If not, then the tax basis is what they paid for it plus improvements, and the sales price minus cost of sale minus that tax basis is the reportable gain. If that gain is less than $250,000 exclusion, then it won’t matter if it is sold this year or some other time, since she can claim the $250,000 exclusion when she sells the home. If the gain is greater than $250,000, she can use his exclusion as well even though his name wasn’t on it, if he lived in it for 2 of the 5 years prior to sale, and they file a joint return for the year of sale. If she will need to use his exclusion as well as her own, then she should sell during this year, when they can fle a joint return.

      1. What if the house was in joint ownership when the husband died and then a couple of years later she has ownership moved to her name alone for reasons of giving the home to family when she dies. But she decides to sell the home instead, does she still get the step-up as of the date her husband died?

  3. I wanted to see if I read all this correctly. Say a husband and wife bought a house for 25k, 50 years later the husband died and the house is worth 1.2 million and it is sold within 6 months of the husbands passing. With the stepped up value in account, does this mean the wife’s half of the house stays at 12k (half the purchase price)and the husbands half of the house rises to 600k (half of 1.2 mil) and the house sells at 1.2 mil, however the profit would be considered 1.2 mil – 612k (stepped up adjusted value) rather than 1.2 mil – 25k (original purchase price, and therefore put the capital gains around $588k. Then is she still eligible for the $500k deduction off the capital gains, making the adjusted total to $88k? Or because of the stepped up value, does she only get the individual deduction of $250k, making her capital gains $358k?

    1. She would be able to claim a $500,000 gain exclusion since the home was sold within 2 years of his death. An unmarried surviving spouse is allowed to claim the larger $500,000 joint-filer gain exclusion for the sale of a principal residence that occurs within two years after the spouse’s death.

      Here’s one more wrinkle to the stepped-up basis rule. If the couple lived in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) and owned the home as community property at the time of his death, the tax basis of the entire asset is stepped up (not just the half that belonged to the deceased spouse).

      1. Actually it was in California, so does that mean that the house’s value (in this case) was considered at the 1.2 mil market value that it sold at, and therefore there wouldn’t be considered any profit that any capital gains tax would be have to paid at all, and would definitely fall under the $500k exclusion if that was the case?

      2. Hi there,
        So my parents bought their house 45 years ago for $75,000. My dad passed away 6 years ago. My mom still lives in the home but will be selling it next year. The current value of her home is $1.3 million dollars. With this example, would she pay capitol gains? Would she get the $500k deduction or just the $250k plus the step up thing discussed above?

        1. If they held it as community property in a community property state, both halves got a stepped up basis to the value on his death. If they held it jointly, then only his half would get a stepped up basis. If he held it in his name alone, the entire ownership would get a stepped up basis. If it was held in her name alone, there would be no stepped up basis. After computing the gain on sale, she can deduct $250,000 as excluded gain for the sale of her principal residence.

          1. Thank you for your reply, but I’m still confused with this stepped up basis rule. They bought the home together and they have held everything in a Living Trust. They have a reverse mortgage on the home. The home is in California. My dad passed away almost 6 years ago. Can you help me run the numbers so I understand it better? Home was purchased for $75,000. Improvements have been made over the past 45 years. The home was worth about $1 million at the time of my dad’s death. My mom plans on selling her home in 2020. It’s current value is $1.3 million. I believe you are saying she will receive the $250k deduction? What portion will she receive for my dad? What is “cost of sale” that you refer to? Her current income is under $37,000 a year. With this scenario, do you believe she will owe anything in capital gains? If so, how do you come to the amount she owes? Thank you in advance for your help.

  4. If it was titled in joint names as community property, that would be correct. If it was titled as tenants in common, then that would not be correct.

  5. I am a widow recently retired this year in California. We bought our house in 1984 for 240,000, now worth about 1,500,000. Husband dies in 2011, I had appraised few months later for 840,000. Want to sell house within next few months. ( also still owe 500k on mortgage). What would I pay in capital gains, we were marrred 39 years.

        1. When you sell your old home, the gain will be the difference between the sales price (net of cost of sale) and what the house was worth when she died. Since you are entitled to exclude up to $250,000 of gain on the sale of your home, so if your gain is less than that you won’t owe any tax.

  6. My wife and I bought our home in California for $1 Million in 2004. My wife passed in 2010 and the home was worth $800k because of the housing market crash. Today the house is worth 1.4M. I remain a widower and I still live in the home. I also refinanced the home in 2015 so I am the sole owner. If I sell today at 1.4M, what will I pay in capital gain taxes? Any advice on how to minimize my tax burden?
    Thank you,


      1. Why is the tax basis $800k? I purchased the home for $1M and I made $100k improvements. Wouldn’t the basis be $1.1M? The 800k is an estimate of the market value when my wife passed but at no time was the property sold.

        1. Under fair market value basis rules, a person inheriting property (an heir) receives a “basis” in inherited property equal to its date of death value.A step-down occurs if a decedent dies owning property that has declined in value.

  7. The tax reform legislation being discussed in Congress states that there will be a 10k cap on property/state income tax deduction. Does this property tax cap apply to investment property too or just the primary residence? I’m wondering if I will still be able to write off property taxes and mortgage interest deductions for my rental properties.

  8. Gina, What if the property, located in CA, was in a revocable trust when the spouse passed. Is the property eligible for the step-up?

  9. Sandra hoffmann

    My husband and I owned a house in New Orleans, we bout it got 140k and put another 450k into it. He died in 2008. I ha e remarried and my new husband and I live here and file jointly. Will I be able to take the entire 500k exclusion and how do I find out Elat the stepped up price was in 2008. New Orleans has never reassessed.

  10. Thank you so much Ms. Wall for your informed advice. I am a widow of almost two years and must sell
    my house in California. A difficult time, at best, but after reading your article and the answers to your readers questions, I feel somewhat relieved about my financial situation. Again, thank you. Marta Kane.

  11. my husband own the property prior to us getting married. He and I refinanced the property years ago and my name was placed on the property. My husband passed away in 2013. I transferred the property into my name. What happens to the Step Up Basis in a case like this. I am a resident of California and the house is a rental property.

  12. We bought the house in NY in 1986 for about 250k. We slowly remodeled the house over time for about 150k. My husband died 3 year ago but deed was only in my name. I’m thinking of selling the house, it may be worth 1.5mil. The house was worth about 1.2 mil at time of death. What is my cap gains situation. Thank you in advance for any help you can provide.

    1. If he is determined to have had an interest in the house at the time of his death, according to state law, then that interest would get a stepped-up basis. If it is determined to be your property alone, then there is no increase in basis to the value at the date of his death.

  13. My parents purchased their home jointly in 1967 for $14,750 in the state of Virginia. My mother passed away in March of 2016 and the value of the home at that time was $400,000. My father wants to sell the home and has been given an appraisal of $425,000. How would I calculate the amount on which he would owe capital gains tax? Thank you in advance for your help.

    1. Your mom’s half of the property got a tax basis step up to its value at the date of her death. The other half of the property, owned by your dad, likely remains at the same tax basis it had before (cost plus improvements). So half would have a basis of $200,000 and the other half would have a tax basis of $7,000+, a combined $207,000+. So the gain would be the sales price less the cost of sale and less $207,000+. If it was his home, then he probably qualifies for an additional $250,000 capital gain exclusion, so the gain wouldn’t be taxable.

  14. How does the appraisal cost of a house and lot effect the sale price of property that my husband and I bought 25 years ago but I am thinking of selling since his death in November?

    1. The appraisal cost will not affect the sales price. It will sell for the price that you agree on with the buyer of the house. You likely won’t have any gain on the sale since I’m guessing that the house got an increase in tax basis to its value at the date of his death.

  15. My husband and I purchased our house 30 years ago for 299K, he passed away in August of 2016. At the time of his death the house value was around 850K. The value now is around 1.1M and I owe 560K. I have also refinanced and now am the sole owner. So if the tax basis is 850K then what would my capital gains be based on? Would I get the $500K exclusion or $250K?

    1. Your gain is the sales price less the cost of sale and less the $850,000 tax basis, which was likely increased to the value at the date of his death. You would be able to exclude $250,000 of the gain under IRC Sec 121.

      1. monica l dickson

        I am selling the house within 2 years of his death so would I be able to take advantage of the “An unmarried surviving spouse is allowed to claim the larger $500,000 joint-filer gain exclusion for the sale of a principal residence that occurs within two years after the spouse’s death. Also 30K of improvements would increase the value to 880K, so 1.1M sale of house less the 880K = 220K less the cost of the sale, I would not have any capital gains. Is my understanding correct?

  16. we bought our house in 1971 for $16,700. Lived in it until the summer of 2013. My husband had cancer and had a disability teachers pension from the state of Md. He also received Social Security but not SS disability. He became wheel chair bound and we needed to move for his disability,,,no stairs , wide doorways etc. e took a Home Equity on our home to buy a rancher and spent 60k fixing it so handicapped accessible. Moved in new house in Nov.2013 even though it wasn’t finished, We kept the old house until we could sell it. It did not sell. So we had to keep it. We did not rent it. Too much for me to deal with. My husband passed in 2013 Dec, I have not been myself. I have had the house up for sale for almost 5 years but it would not sell due to the location or a six lane road. The state took most of our yard for thier but highway, Finally someone wants to but it. I need to get enough to pay off the home equity which is $150K. Offer is 300k. I am a widow. Inherited his half of the house in 2013 worth about 120k. I have not lived in the old house since 2013 November. We had to move because of his disability. I, afraid I won’t have enough profit after taxes to pay the home equity. Help! Please. Im not sleeping.

    1. You have an offer of $300,000. If you accept that offer and sell it, there will be costs of sale deducted (title insurance, etc) and he home equity loan of $150,000 would be paid off, leaving you with the balance in cash. Your gain would be the sales price less the cost of sale and less the tax basis (your half cost $8,350 and his half was increased to tax basis of $120,000). You will not be eligible for the $250,000 exclusion since you did not live in the home for 2 of the 5 years prior to sale. You can have an accountant figure out the taxes that would be due under the federal and state laws, but it likely won’t be more than $30,000 in taxes. So you will have plenty of money after paying off the home equity loan with which to pay the taxes.

  17. I find all your questions and answers very interesting and informative. My question is: Does this information only apply to widows or are widowers included

  18. My wife & I have a revocable trust. She passed away in a tragic car accident January 16, 2017. On 09/08/2017, I then decided to sell rental property we jointly owned in the trust. The selling price was $616,000. We bought the rental property in 1972 for $45,000. I had the property appraised & it was worth $635,000 at the time of her death. What then is my cost basis? We both live California.

  19. My husband died unexpectedly last yr, leaving me with a large home and high property taxes but little income. If I establish a legal apartment in the mother -in -law unit (not legally rentable in my town) already in my basement, will renting out that legal apartment adversely affect my income taxes/capital gains if I end up selling my house in a few yrs? I live in Washington state. Thanks.

    1. I believe that the portion of the home that is a rental will not be eligible for the $250,000 exclusion from capital gains when you sell it in a few years. But that may not be a problem if it doesn’t go up much between now and then. Talk to an accountant about your exact situation and get some advice on how to structure this to give you the income you need and not jettison your tax situation.

  20. I got married in 2014. My much younger wife died on our honeymoon from an aneurysm. We had not even been signers on each others bank accounts much less on our properties. She owned 2 rentals. I own a duplex outright and my single family primary residence. few questions:

    The 250k is that just for primary residence? What is the rates and such on rental property?

    What would be the basis on property not in my name but legally “mine” from being in her name since she has passed away?

    I have a duplex I bought 30 years ago that is paid off now. The purchase price was 89k, it is now worth 400k.

    I have made significant improvements thru the years. If I had a 3 year plan. Could I move Back into that rental duplex in a year. Live there 2 years and then NOT have to pay capital gains ? Then I could also negate my capital gain on my now primary residence because I would still have lived in it for 2 of the last 5 years?

    I know its a ton of questions! I have been so shattered after her death that these “smaller” matters have taken a backseat.


    1. What a difficult time you have been through! To answer your questions: There is a $250,000 capital gain exclusion when you sell your principal residence, and you can claim an exclusion not more often than every two years. If you have a rental and convert it to a residence by moving back in, a portion of the gain can be excludable measured by the period during which it was a residence since 2009 divided by the total time it was owned. When you sell a rental, the depreciation you have claimed over the years is recaptured and taxed at whatever tax bracket you are in, and the rest of the gain is taxed at capital gains rates (generally 15% to 20%, depending on how high your income is). If you inherit property, the property receives an increase in tax basis to the value at the date of death.

  21. My husband died Jan 2018. We purchased our home in 1987 for $145k and have done an $120k upgrade. Our home is worth $1.6m and I want to sell as he passed away in the home. Can you tell me what the capital gains will be. Thanks.

    1. It is likely that the home received a stepped up tax basis to the value on the date of his death. If that is the case, and you sell it for a value similar to that at the date he died, there will not be any capital gains.

  22. My question is in regards to the step up valuation. A widow who has lost her husband 7 years ago has a stepped up basis for his portion at the time of his death/transfer. What valuation method do we use if there is no appraisal done at that time of death?

    1. Mother dies 3 years before daughter sole heir gets around to selling. Nobody has lived in house for 3 years. Did daughter have to sell within 2 years of mothers death to avail herself of capital Gaines exclusion?

      1. Since daughter did not live in home for 2 of 5 years prior to selling, she won’t qualify for the $250,000 exclusion for sale of her personal residence. But since the property likely received an increase in tax basis to the value at the date of mom’s death, she’ll only pay tax on the increase in value since then, minus costs of sale.

  23. Margaret Slough

    My husband passed 10 years ago. After about 3-4 years I moved out and turned it into a rental when the market crashed in an effort to keep it until the market recovered. I thought I’d move back in but I never did. I considered it my primary because I lived in it so long, never considering it “an investment”
    I did rent it out for about 5 years and did not live in it two of those five. I paid 182,950 originally, when he died in 07 the value was $350,000 and I sold it in 2017 for $415,000.
    91,475+174,000=$266,475 tax basis correct? So I’m over the $250k mark.
    415,000 – 266,475 = 148,525. The improvements I put into the house does not come into play at all with this equation. I probably put in improvements somewhere from 30-50k. What happens now?
    Does this above scenario apply to me even though I was a “landlord”?

    1. It is likely that the property’s tax basis increased in whole or in part to the value at the date of your husband’s death. Any improvements you made since then increase the tax basis. Since it was a rental, the depreciation you claimed during those years will reduce the tax basis. Since it was a rental, you will not qualify for the $250,000 exclusion for gain on sale of your personal residence.

      1. My mother passed away and in asking a CPA what we use as proof of the step up basis for the home value she made me feel like I could just ask a realtor to get us some comps at the time my dad died 18 years ago. Does that sound correct?

        My mother passed away and in asking a CPA what we use as proof of the step up basis for the home value she made me feel like I could just ask a realtor to get us some comps at the time my dad died 18 years ago. Does that sound correct?

  24. This info on “step up basis” is very helpful as my mom will be selling her house soon and she is a widow. I have been going thru the IRS pub 523 to get an idea of what we would be in for filing her taxes next year. I have not seen anything on the step up basis and was wondering what IRS guideline this falls under?

  25. My mother and father lived in a house in oroville ca
    My father died in 2008 ay which time the house was worth 235,000
    3 months later our mother put the house into my brothers and my name
    She lived in the house until2018 when she also passed away
    We are selling the house for 235000
    What is our capital gains

    1. It is very possible that the house got a stepped-up basis to the value at his death if it was held as community property. If that is the case, when you sell it for the same amount as it was worth at his death, there will be no taxable gain.

  26. I’ve been reading the thread about the step-up and capital gains taxes. I purchased my home in CA in 1997 in just my name. In 2010 my finance moved in and began contributing to the mortgage payments. We married in 2012 but I had the home in a trust and never changed the ownership to add his name. In 2015 he passed away. Even though his name was not on the title or the mortgage, I am wondering if the fact that the property is in CA and because he was contributing to the mortgage payment using our joint checking account – if I am able to use the step-up value when I sell the property.

  27. Both husband and wife lived in CA and owned a primary residence as “joint tenancy” and the title of the property was transferred to a REVOCABLE LIVING TRUST before one of the spouses passed away. When the first spouse passed away and the surviving spouse wants to sell the property, will the “step up basis” rule be different if the primary residence is owned as “joint tenancy” than as “community property”? i.e. the surviving spouse gets only half step-up basis if “joint tenancy” versus full step-up basis if “community property”?

    And what if the property is a rental property instead of a primary residence provided that the other factors remained the same? Thanks.

    1. It is my understanding that joint tenancy is not recommended for married couples who own assets that can increase in value, such as a residence, because the surviving joint tenant will not receive a “step-up” in cost basis to fair market value at the date of death of the other joint tenant. Community property generally gets a step-up in value for the entire property.

      1. Thanks. Do you mean even the surviving spouse who is the “joint tenant” will not receive the “step-up” in HALF of the cost basis to the fair market value at the date of death of the other joint tenant in a community property state like California?

  28. If held in joint tenancy, it is my understanding that it is deemed that half the home was owned by the spouse that died and is part of his estate. That part gets a stepped up basis to the value at the date of his death. The other half is deemed to be owned by the spouse that lived and is not included in the estate of the spouse who died. That half does not get a stepped up basis.

    1. So even if the entire property is transferred to the couples’ JOINT REVOCABLE LIVING TRUST prior to the death of the first spouse, the spouse that lived only gets half of the stepped up basis from the deceased spouse?

  29. Patti Crawford

    If you didn’t have an appraisal done at the time of death, what’s the best way to get a valuation. Death was 7 years ago.

  30. How does this apply to children? My father in law passed away a few years ago (has 4kids)and his wife continued to live in the home (has 2 kids from different marriage) until she passed away 5 months ago. The house finally sold but the title company said the value increased between the date of his death and hers. My husband split the money with his other 3 siblings and her kids split their half. The title co is sending a 1099 but the difference is way less than the 250k amount mentioned. So do the children need to pay a capital gain? Do you still file the 1099 if not?

    1. The person who inherited the house received a stepped up basis to the value at the date of your father in law’s death. If that person lived in the home for two of the five years prior to sale, then the first $250,000 of gain above the stepped up value is excluded from tax. If his wife inherited the property, upon her death the property received a stepped up basis to the value at the date of her death. If your husband and his siblings were the ones who inherited the home from their father (and his wife was simply given the rights to live there until her death) then they have a gain of the value less cost of sale less value at the date of their father’s death. It doesn’t sound like any of them lived there for the requisite time after they inherited it, so no $250,000 exclusion would apply.

  31. Hi Ginita, my godmother who is widow, wants to know how does improvements made impact stopped up basis. When husband died, house was valued at 400k. She has since made improvements. Do we add improvements to stepped up basis, and subtract sale price and 250kexemption to arrive at final amount?

  32. My husband passed away in 2011, i didn’t know step up till now. I didn’t do appraisal after his death. Could i still benefit for the step up plan ?

  33. My husband bought a home with my son. My name was never put on deed so the home is my sons now because i husband passed away. Would they be able to do the step up basis if they sold it

  34. According to your instructions, I have calculated that my mom, a widow, would owe capital gains on $250K if she were to sell her home, which she is considering since she is extremely low income (she gets below $15,000 per year income from social security and nothing else.) How would the capital gains play out in CA? How much cash would she actually owe on the $250K taxable portion? If I understand correctly, the 0% for low income is only for federal portion, but aren’t there other local taxes in CA and would she get a greak on those as well? She is considering using prop 60/90 to trade down to a cheaper home so she can unlock some cash for aging emergencies, but if she loses a large portion of that to cap gains, she does not want to do it. I remember hearing that cap gains in CA can be somewhere between 30 – 40%. Thank you.

  35. Jennifer C Payne

    I am widowed since 2007. Sold our house of 30 years in 2013. Now because I have health reasons, must sell my home . It it in a trust, how much tax deductible do I get, 250,000?

  36. My husband passed away in 2017. A small house that he owned (solely) passed to me by beneficiary deed (Arizona) at that time. I sold the house in 2018. Stepped-up basis would easily cover the gain. What other factors do I need to consider concerning the taxation of this sale, if any?

    Thank you.

  37. Hi, I was searching for my Dad on tax break on the capital gains when his house gets sold. My mother just passed in March 2018 and he wants to sell the house. I have the power of attorney on all his financial affairs and not sure what to do when the house sells. The house is on the market (on Maui, Hawaii) and there are possibilities that it will sell for 1.5M. He bought the land and built a compound which didn’t cost much back then. there is lots of equity in the house. Does your article on capital gain tax break apply to widowers too? I’m a little confused on how this works. What tax breaks can he claim ($250K, $500K or step-up)? Who can I contact for advice on tax breaks?

    Thank you, Minda

    1. Your dad is lucky to have you to do this research for him in this time of grief. Surviving spouses may exclude $500,000 of home-sale profits from taxes if they sell the house within two years of their spouse’s death, as long as they owned and lived in the house for two of the five years before the spouse died. And if your mom was an owner of the house, her share gets a stepped up tax basis to the value upon her death, which should reduce any taxes owned significantly. Contact an accountant who knows the tax laws to get specific information on your dad’s situation.

  38. Hello. I’m a retired senior (low income). I bought a house in California with my husband in 1994 for $250k. We refinanced the house in 2001, and it was worth $450k at that time. I also added my daughter to the deed in 2001, but she moved out in 2005 and bought a house of her own. Her name remains on the deed. In 2015 my husband passed away. At the time of his passing our house was worth $700k. I’m looking to sell my house today and I want to know how much is my taxable capital gains. Today my house worth $800,000
    Thank you in advance.

  39. Thank you for your reply. So my daughter has to pay capital gain tax even if she doesn’t live in this house for many years?
    Thank you

  40. Hi there,
    My parents purchased their home in a Family Trust for approximately $30k in California during the early 1970’s. My mom had a stroke in March of 2016 and we decided to take out a reverse mortgage on their home to help pay for additional home care. The house was appraised in October 2016 for $1M (as part of the reverse mortgage qualification process). Then my dad passed away unexpectedly in January 2017. We finally had to move my mom into an assisted living facility and are planning to sell the house soon. She doesn’t have any income and is living off of their savings and the reverse mortgage funds. Does my mom need to sell by January 2019 to qualify for the $500k tax exclusion? If she waits until after the two year mark, will she only be able to claim $250k exemption (for singles)? We are trying to figure out how quickly we need to sell. Would it be most sensible to sell the house before the two year anniversary of my father’s death? Thank you so much!

    1. Your dad’s exclusion will go away two years from his dealth. However, your dad’s portion of the home received a stepped up basis to the value upon his death in 2017. If the property was held as community property when it was transferred into the trust, then your mom’s share may have received a stepped up basis at the same time. If so, then it is likely that there isn’t a lot of gain and the $250,000 gain exclusion she has available to her will be sufficient. Check with your tax consultant to be sure.

  41. My husband and I owned our house and 146 acres in Wisconsin with both our names on deed. He passed away suddenly in 2016. We bought the property for $73,000 and added a $45,000 house in 1990. In 2013, we had house and 78.5 acres appraised to refinance loan. It appraised at $416,000, without the remaining 67.5 acres. The value of remaining land is estimated at $184,000. I would like to move and property has been listed for 6 months at $594,500 but it hasn’t sold yet. Will I lose stepped up basis if I go ahead and move to SC? Can I rent out my Wisconsin home until it sells or does that impact stepped up basis? I cannot afford to move and pay capital gains taxes once the property does sell. Appreciate any help so I can make plans.

  42. (Ohio) My father died 2/21/2018. House and land purchased in 1969 for $23,500. My mom sold their primary house for $176,000 in July 2018 but kept 190 acres of land valued approx. $600,000. Since she sold the house within 2 years, if she sells the remaining acreage this year or next year, can she combine the purchases to receive a joint capital gains exclusion?

    1. The portion of the property owned by your dad received a stepped-up tax basis to the value at the date of his death, and so there is capital tax due only on the difference between the net sales price and that amount. In addition, there is a $250,000 capital gain exclusion available for the sale of the home (not the extra acreage).

  43. Situation: The primary residence property in CA was purchased by the wife before marriage. Early in the 18 year marriage the home was refinanced and the title was changed to both the husband and wife’s name. Six months before the husband’s death, the house was refinanced and the title was changed to the wife’s name only. Throughout the marriage, the mortgage was paid with commingled funds. Question: At the time of the husband’s death, does the stepped up value get applied to the home’s basis? If not, if the home is sold before the 2nd anniversary of the husband’s death, does both the wife’s 250K and the husband’s 250K deduction apply?

    1. If the property was the separate property of the wife under California law, then there would be no step-up in tax basis upon his death. If it was community property, then both spouses’ 50% share would be stepped up in value. And if it is sold within two years of his death, each spouse can use the $250,000 exclusion on the sale.

      1. HI,
        My mother, who recently passed away June 2018, lived in her home in MA from 1963 until 2014, at that point she needed to be cared for and medical help which I moved her to FL to live with me her son. (My dad had passed away in 1985 and my older sister passed away in 1993) In 2009 she had added me to the deed on the house with her. So at that time her primary home a secondary home for me. Their was not any mortgage on the home after 1985.
        Before she died we had decided to sell the home since at 92 she was not going to move back. The home sold and closed in November 2018 for $300,000. I received in the mail the 1099-S which prompted my to review the capital gains options I may have?

        1. Since you were on the title, you may be taxed on your share of the capital gains on sale. But talk to someone knowledgable about taxes and real estate in your area. If you were added to title just for ease of transacting business, it may be that she didn’t actually transfer ownership of any portion to you at that time.

  44. I have a home in CA that I’m planning on selling. My husband purchased the home 40 years ago as a single man. We married in 1988 and a few years later the house was refinanced the title was changed to both our names. My husband died in 2015 and I placed the home in a revocable trust in my name only. I’m now interested in selling the home since I reside in another state. I would like to use the proceeds from the sale of this home to pay off a rental property. Do I still get a step-up tax basis? What is the capital gain exclusion, if any? Thanks.

    1. It sounds as though the home was in both names when he died. His half received a stepped up basis at the time of his death, and depending on how title was held, your half may have been stepped up also. Consult a tax person who is familiar with marital real estate to have them review the paperwork for you. You’ll be able to exclude $250,000 gain if you lived in it for two of the five years prior to sale.

  45. My situation is a little different. My Mother-in-Law, an Ohio resident (not a community property state). was widowed in 2014. The house that she lived in was 100% in my Father-in-Law’s name. She continued to live there until 2016. However, unbeknownst to her, the deed on the house was never transferred to her personally (technically it is still sitting in my Father-In-Law’s estate). If she utilized this home for two years as a primary residence would she be able to exempt the gain on sale of the house? Or is she not allowed to do so because the house was technically owned by her departed husband’s estate for the period that she used it as her principal residence?

    1. If she did not own the house, then taxes on the sale won’t apply to her, since she can’t sell what she doesn’t own. But if her husband died and left her the house, and they simply failed to transfer it into her name but she has it now, then I would think that she can claim the $250,000 exclusion. Check with a tax person and give them all the facts so they can advise you.

  46. What happens when the wife did not live in the house for the 2 years prior to husband/s death.
    Example: My friend’s husband died in Ohio and thru a Quit Claim gave her the house and 50 acres of land.
    She will be filing a joint income tax for the 2018 year. His income, her income, money from the sale of
    personal property (furniture, etc. from the house) and money from farm equipment (tractor and plows, etc.)

    Due to holidays, etc., the house and land will not sell and close until 2019. When that house and land
    is sold, what will her capital gains tax be, or what will her EXCLUSION be? The old farm house
    is only selling for about 68,000 dollars, but the land will go for about $340,000.

    I am Robert House the friend.

    1. She should talk to an accountant who has good knowledge of the tax law in this area. If she inherited it, then there won’t be a gain, since she would have received a stepped-up basis to the value at his death. But if she received it by the quitclaim before he died and so it was not part of his estate, it would not have received a stepped up basis. In that case, she may be able to exclude the gain on the house by virtue of being married to him and it was his principal residence, but she likely can’t exclude the gain on the farmland, because the farmland is not a personal residence.

  47. Heather Simmons

    Hi Ginita,

    I have a question on step up basis in a community property state. What if the property/ies were placed into a trust….would the spouses half step up then? I see above that in a community property state, the entire basis can be stepped up, but how does any of that work if a trust is involved? Only the spouses’ half, or both, or none? Thanks so much for your help!

    1. It depends on the trust. Most living trusts these days provide that the property transferred into the trust retains the same character it had before it was transferred in. So if it was community property, it remains community property, even though it is held in the name of the trust.

  48. Hi, Ginita,
    Would appreciate your feedback on the matter below:

    Purchased a house in 1976 for 34,000.00 in MD
    The Deed is under husband and wife’s name.
    Remodeled the house through out and added lots of new additions.
    Husband died 1989
    House was not appraised at the time of death
    The wife did not change the Dead and still is under both names.
    Wife moved out 1991 and rented the house up to present time.
    During rental period the house has had some expenses, has been renovated few more times.
    Took depreciations each year.
    Each year reported all rent revenues, expenses and depreciations.

    Plan to sell the house this April. Either give the proceed to daughter in Europe or buy a joint property in Europe.

    For cost bases, plan to claim the sell of the house less than sell expenses and less all improvements, recapture depreciations and pay capital gain taxes.

    Do not have plan to make it primary resident and live in it for two years and claim capital gain tax exclusions.

    Am I missing any points? Am I on the right track? Any suggestions?

    1. You are correct that the home doesn’t qualify for the $250,000 capital gain exclusion since it wasn’t her residence for two of the five years before sale. Don’t forget that Husband’s half of it did get a stepped-up basis to the value at the date of Husband’s death, which will increase the tax basis of the home and decrease the capital gains.

  49. Ginita,
    Thank you for your response. Based on what I have read, the wife will pay tax on current value, less sale expenses, less value of the house at time of husband’s death, less home improvements?

    Would you please explain about the captured depreciations?
    Thank you.

    1. If the owner claimed depreciation as a deduction in figuring taxable rental income, then that will be “recaptured” at the time of sale and taxed then. Whoever prepares the tax return will use a program that makes the appropriate computations.

  50. My husband owns 2 homes, we live in one currently in California. I am not on title on either properties.We have been married 10 years this June. I have lived in my current home for over 11 years. The value is 1.3 million in the residence we reside in, and the income property home is valued at 1.4 million.
    What Happens in this case? What recommendations do you have for me?

  51. Richard Farrant

    So I know this site is for women, but I am struggling to find an answer to a question I have. My wife, who I lived with for 10 years, owned the home we resided in. For most of those years, I paid the mortgage. She planned to add my name to the deed but died before doing so. I had an attorney legally put the deed to the property in my name, then I later sold the home. There was little equity in the home, but I did reap a small sum from the sale. What capital gains am I responsible for? I trust the answer to this question will apply to other surviving spouses as well.

    1. If the property was in her name when she died, then your tax basis is he same as the value on the date of her death. If it was your home, then you can exclude from tax up to $250,000 additional of gains. I’m guessing that will result in no taxable gain.

  52. My husband died in 2005. I know I am eligible for the $250,000 exclusion. I understand that had I sold the house within two years of my husband’s death, I may have qualified for the $500,000 exclusion. I couldn’t move at that time because I needed to continue to provide an accessible home for our disabled son. I continue to be his full-time caregiver. The house is fully equipped for him with stair lift, rails, ramps, etc. Should I have tried to move us earlier, or is there any exception where the exclusion applied today could be higher than $250,000?

  53. In 1961, my parents bought our home for $13,000. My father passed away in 2002 and this past year (2017) we sold her house for $95,000 (the proceeds to help pay for personal care home). Does she have to pay a capital gains tax on the difference? She’s 90 and receives social security and a small amount from my father’s pension.

  54. My husband bought a duplex before we were married, it is in his name only in Florida and we have 2 (adult) children together. He does not have a will. What happens to the property if he dies?

  55. Husband and Wife owned and lived in home continuously for over 20 years. Never took exclusion in prior years. Husband passed away in early 2018. Widow sold home in June 2018. Widow remarried in late 2018. Widow is now filing taxes as Married Separate. Can the now married Widow claim the $500,000 exemption? Home was sold before widow remarried.

  56. Do these rules still apply when selling rental property. It was the only retirement income my mom was left with after my father passed. Now that income is gone & she lives off the sale.

    1. If someone owns real estate, that real estate receives a stepped-up basis to the value at the time of their death, which reduces capital gains upon the sale. This applies to all real estate, not just residences.

  57. Kenneth Malone

    Our home was in a revokable Living Trust. Upon the death of my spouse the Living Trust became Irrevocable. So the trust now has its own Tax Id Number. I know I get the step up basis. However since the now irrevocable Living Trust owns the house, I suspect I do not get the $250,000 exclusion. Is this correct?

    1. No you do not get the exclusion, or will you report the home sale on your tax return since you don’t own the home. But since the home has a stepped-up basis, the trust shouldn’t have much gain to report on sale, only the increase in value from date of death to date of sale.

  58. Deborah A Mulcahy

    MY parents bought our house in 1967 for 16k. My father died 6 years ago. At the time of his death the house the was worth 220k.
    We moved my mom out 3 years later to a retirement living, and the house stayed vacant until we just recently sold it. (Vacant for 3 years) The neighborhood depreciated, so it only sold for 143k.
    My father renovated almost the entire house prior to his death.
    I want to make sure I’m understanding properly.
    The step up would be 110k (half of house value at dads death)
    Minus half of all improvements made to the house prior to dads death? Or is it the full amount of improvements? Example 30k in improvements, step up would be 15k (half?) or 30k (full amt?)
    Ex. 125k step up. 143 minus 10k closing cost. 133k -125 (step up) is 8 in capital gains.
    Or ? 140k step up. 110k + 30 in improvements 133k – 140. (No capital gains) ?

    1. The tax basis for your father’s share of the house is $110K, half the value at the date of his death, if he was half owner. Your mom’s half is 50% of the original cost, plus 50% of the cost of improvements, if she owned half.

  59. I am a widow and I have a mortgage on my home. Although I have three children, I would like to leave my home to one of my children. What is the best way to do this?

  60. My son his named in my will as a recipient of my house. He expects to pay off the mortgage in the event of my death. So what does he have to do in order to have the deed converted to his name?

  61. When you die, your will will be probated, and once it has been confirmed to him as beneficiary he can prepare a new deed transferring it to his name.

  62. Ok what happens if the house is deeded to the trust. Does the step up basis still apply. House is in Illinois cook county

    1. If you have a revocable living trust, then that is treated as just another form of personal ownership, so it should get a stepped up tax basis for federal income tax purposes, just as though it had been titled personally.

  63. Lillian Mosier

    My husband of 39 years died 6 yrs ago. We owned a home held as community property. We bought it for 200,00 and stepped up value is 1,690,000. We had improvements of 113,000. I sold the home in 2018 for 2,500,000 with 350,00 selling expenses.
    How do I figure gain and take 250,000 exclusion?

    1. Here’s what the IRS says: Use Form 1040, Schedule D, Capital Gains and Losses and Form 8949, Sales and Other Dispositions of Capital Assets when required to report the home sale. Refer to Publication 523 for the rules on reporting your sale on your income tax return

  64. My husband and I purchased a home in Nevada in 2002 for $232,000, joint tenants with right of survivorship. He died early 2005 (high point of real estate market here). I’ve put some improvements into the house and also claimed a home office deduction as I’m self-employed. I would like to sell this year, presumably in the neighborhood of $450,000. My questions are:
    1) I realize this doesn’t exceed $250K profit, but how do you determine the value on the date of death without an appraisal in case it sells for more? Zillow or something?
    2) I (unfortunately) am using the Affordable Care Act this year only and can’t bump my income at all without incurring significant increase in premium. Does a home sale affect Modified Adjusted Gross Income?
    3) Does having taken the home office deduction for all the years I lived here somehow factor into figuring gain on the sale?

    1. You can have a real estate agent research what homes were selling for in that neighborhood around the date of death, or have an appraiser appraise it at that date. I believe that capital gains are included in MAGI. And the depreciation you claimed on the portion of the home that was used as a home office does not qualify for the $250,000 exclusion, and is taxable at a 25% federal tax rate, plus whatever state taxes you may owe on it.

  65. I live in Los Angeles, CA. Husband and I purchased home for $70,000. in 1970 and he passed 18 months ago. I now want to sell as it is too big, memories,etc.
    I’m so confused with all the tax issues. If I sell for $1.2 million, I am 72 years old, I have income of $25K a year, will I owe taxes at all? Do I get the married exempt $500.K? I read if income is less than $30K I do not owe any capital gain taxes is that correct? If Not, what is the tax due at sale?!? Please help me understand this. Thanks, Erica

    1. If you and he owned it as community property, it gets a stepped up basis to the value at the date of his death. If it has gone up in value since then, you can offset that gain with your $250,000 exemption and also his if it was sold within 2 years of his death. So it is likely that there would be no taxes due. If you and he owned it as joint tenants, I believe only his half would get the stepped up basis. So you’d owe taxes on half the gain less the cost of sale, less your $250,000 exclusion. And since a surviving spouse may exclude up to $500,000 of profit from the sale of the principal residence if it occurs within two years of the spouse’s death, if the gain were within that time period you could take another $250,000 exclusion for him. So if the sales price after cost of sale were $1100,000, and his half of the property got a tax basis increase to $600,000, you’d owe tax on $500,000 less your $250,000 exclusion, and less his if that applies. So the net taxable gain would be zero. So it would be best to get it on the market so it sells within the next six months.

  66. My husband died 4/3/19. We purchased our home 4/5/18, so we’ve been here less than 2 years. The property will sell for $620,000, but we purchased for $537,000 and we put 20% down ($107,400).
    With a $83,000 profit and occupancy under 2 years, what can I anticipate? Does equity/down come into play or just profit above initial sale/value?

    The home is in Nevada.

    Thank you.

    1. If you are selling because your spouse died, then you can claim partial exclusions. So if you were in the house for 1 year instead of 2 years, you can claim an exclusion of 50% of $250,000 (1 divided by 2 years) rather than the full amount. And it is also likely that the property got a stepped up basis to the value on his death, so either way, you won’t owe tax.

  67. Hi. Came across this page, seems very helpful and appreciate your input for everyone’s issue here.

    My mom is selling her home. Bought it for $59000 back in the early 80’s. She is selling the home for $470000. (Less agent fees, closing fees, etc etc — I expect her to get a net check of about $440000). Resulting in a net profit of $381000. We should be closing in 60 days

    When it was first bought in 1981, my mom and dad owned the home together. In 2010, full ownership was transferred to my mom. My dad passed away in 2014 and my mom did not remarry.

    Fast forward to today, we are planning to buy a new home together and planning to use the proceeds from the sale as a down payment.

    a) What amount would my mother be taxed on if she is widowed? (I’ve read about many tax exemptions and I know based on your marital status, you can claim $250k if you’re single, $500k if married. Not sure about if you are widowed)

    b) Approximately how much taxes would she expect to pay? If this helps, she earns less than $35k a year strictly from only social security, 401k payments and pension payments.

    c) Any other exemptions she can take advantage of to reduce the tax hit?? I know she can take certain exemptions like home improvement throughout the years, but those receipts are long gone.

    Any advice you have would be great and I thank you in advance.

    1. She will pay tax on the gain, less a $250,000 exclusion since it was her principal residence. She should reduce the gain by any improvements made over the years, even if she doesn’t have receipts. If it makes sense, take a picture of the improvements to be able to show they were done if there are any questions. The tax rate for capital gains is generally 15% federal plus whatever her state taxes are.

      1. Thanks! Just some add-on questions —-

        Is there a timeframe where she would have to utilize all the proceeds for the purchase of a new home? I’ve heard from people telling me she essentially has 45 days or the end of the year to use the proceeds towards a new home to avoid being taxed… not sure if that is true or not.

        Also, she’s contemplating on no longer wanting to be on the joint mortgage with me on the new home. (She doesn’t want to have the new home in her name) So, she’s essentially giving me her net proceeds as a “Gift”. Does this mean she would be taxed on the gain (less the $250k exclusion and improvements) AND pay a gift tax?

        In your opinion, to avoid the most tax hits — would it best she stay on the mortgage application or she’s ok with being removed from it?

        Any other advice you can provide would be great.

        Thanks again in advance!

  68. My husband & I bought a house in New Mexico in 1980 for $163,000. We made $209,000 in improvements over the years. In 2015 we moved to CA to a smaller house, but we kept the NM house and let a daughter live there (for no rent). We became CA residents in 2015. My husband died 2 years ago, June 2017. The NM house had a stepped up value of approx. $600,000 when my husband died. Now I’d like to sell the NM house. I am uncertain about the exclusion amount and what the taxes might be since I have been in CA for 4 years, but previously lived in the NM house since 1980. Your insights are greatly appreciated!

    1. Your tax basis is the stepped up value of $600,000. It doesn’t sound as though you would be eligible for the exclusion for the sale of your principal residence since it wasn’t your principal residence for the past 4 years for either one of you.

  69. Jill Jacksons

    Ms. Wall,
    1. My house was not appraised when my husband died in 1989. How can I find the approximate price at the time of his death? Would IRS accept a note from a real estate agent or does it have to be from an appraisal? Are there any other options?

    2. The house improvements and numerous additions were done around 1984. Rented the house 1991 and the kitchen and bathrooms were remodeled few times to make it comfortable for tenants. Would only initial improvements can be deducted from capital gain or each time the kitchen or bathroom have been upgraded?
    Thank you,

    1. The IRS may require a retroactive appraisal if they challenge your figure, and the odds of that are pretty low. So for now consider getting a retroactive analysis from a real estate agent. You can always get an appraisal in the unlikely event you are audited. And you can add all upgrades made since that valuation date of 1989.

  70. There is no timeframe in which she can invest the proceeds and escape the tax. Those rules changed in 1997, and now gain in excess of $250,000 is taxable, period.
    If she sells the home, she’ll be taxable on the gain less $250,000. If she gifts the proceeds to you, she’ll need to file a gift tax return, but gifts are only taxable if they exceed $5 million over her lifetime, which isn’t likely.
    A sale is triggered by transferring ownership to someone else for fair compensation. A gift is triggered by gifting property or funds to someone else without fair compensation. Whose name the mortgage is in has nothing to do with who owns the house. If she buys a new home with the proceeds and puts your name on the home, she will have gifted you half the value of the home if you become half owner.

  71. Pingback: Cutting Your Tax Bill When Selling a Widow's Home - III Financial

  72. Lutricia Forbis

    My husband passed 12/2018. We have been in our home in Tennessee for 34 years. I am thinking about selling it next year. But he also owned, with his sister, property deeded to them before she passed away with a lifetime estate. She passed in 2016. I inherited these two pieces of property, along with her, and am now going through probate. Once probate is complete we intend to sell one of the pieces of property he owned with his sister, and maybe the other sometime in 2020. How does all of this affect taxes for me? Will my half of the property be stepped up?

    1. Lutricia Forbis

      Just to clarify regarding the two pieces of property my husband owned with his sister, it was their mother who passed away in 2016. His sister is still living.

    2. It is likely that only his half of the home got a stepped up basis, if you owned it jointly. The property he inherited from his sister would have gotten a stepped up basis in 2016 when she died. And you get a stopped up basis when you inherited it from your husband.

      1. Lutricia Forbis

        I did not have any ownership of the property. I tried to clarify that his mother is who had died. His sister is still living and he owned the property with her jointly as tenants in common. I am his heir. Going through probate now due to these two properties. Their mother deeded the properties to her children in 2016, before she passed away. She is who passed. The sister, whom owns half of these two properties is still living as well.

  73. What does stepped up value mean ?
    My husband and I purchased our home in Ca in 1999
    For 450,000 it’s worth 1.3 now and we want to down size to a smaller house in the same area . It is community property as stated in trust . Also we have done 200,000 in upgrades to the home , can you help me figure out what our capital gains might be ?
    Thank you

    1. When you sell a property, you pay tax for the difference between the sales price and the original value, increased by improvements (that’s called the tax basis). But if the property owner died while owning the property, then the value at date of death is substituted for the original value, generally resulting in a higher tax basis and a lower gain. And since both you and your husband are still alive, that has no bearing on your other question.

      If you were to sell your current home, you’d pay tax on the sales price, minus the cost of sale, and minus the original cost and cost of improvements. Since it is your principal residences, each of you can reduce that capital gain by $250,000. So the net result will be very little taxable gain, and therefore little tax.

  74. My husband and I purchased a home in 1994 for $220,000. He died in 2007 the house is now worth $550,000 what would my capital gains obligation be? How do I find out the value of the home in 2007?

    1. You can ask a real estate agent to get you that information, or have it appraised at that date. Your gain would be the sales price minus the cost of sale and minus the tax basis, which may have been stepped up to the value at the date of his death if he was the full owner of it. If you owned half, then it is possible just his half received the stepped up tax basis, and your half retained the tax basis based on the original cost plus improvements.

  75. I have a similar question my wife was killed on June 30 2016, I have purchased a home in mesa Az for 485000.00 and I sold mine for 649888.00 closing dates mine sept, 23 new one sept 25 the median cost of homes in my area is around 590,000. 00 for homes sold 30 days before and 30 days after her death can that be the basis or is there another way the I R S wants you to get the step up value. I have done a lot of work on this home and have recites, on your calculations what do you think I may owe in capital gains without the upgrades like solar ,sunroom etc. in California

    1. Since I have lived here from June 16th 2016 date of my wifes passing till sept 23 2019 I will not be able to get the step up bases. for the last year and half I have planed on moving My home needed a lot of work done on it before I could sell it. I’m so confused I am so confused can you explain what I may owe the IRS , thanks

      1. You have lived in the home for 2 of the 5 years prior to sale, so you are eligible for the $250,000 gain exclusion for the sale of your principal residence. And since your gain will be very little, according to the facts of your previous post, you likely won’t owe any income tax on the sale.

    2. The median value of homes in your area doesn’t speak to the particulars about your home. Ask a real estate agent to give you an estimated value of your home as of 6/30/16. That will be your tax basis at the time of her death, and you can add to it any improvements you have done since then. If you sold the home for $650,000, after subtracting the costs of sale, costs of improvements and value at the date of her death, there likely will be little or no gain to be taxed.

  76. My husband of over 40 years died in 2016. I owned the house we lived in since the 70’s and have a beneficary deed if I died first the house would pass to him. My house is now worth around $500,000. If I sell the house now, do I have to pay capital gain taxes on the full price of the home as a single person.

    1. Since he did not own the house at the time of his death, then it likely isn’t part of his estate and doesn’t get an increased tax basis. You can check with a tax accountant or attorney to be sure. So if you sell it, you will pay tax on the sales price minus selling costs and minus original cost and the cost of improvements.

  77. Husband dies in 2000 . House and land was in name of husband and upon death it was transferred to wife. How does this transfer of property affect capital gains?
    Also–Nothing was ever done to figure out the new stepped up value of the house in 2000. No appraisal or anything. Now that it is 2019 -we have the place for sale. How do we determine the stepped up value from 19 years ago?. Also does the widow also get the $250,000 exemption upon selling? Is there anything we need to do before selling the house? What happens if we cannot find receits for improvements done to the house? Is there a list of improvements that elgible ? Painting? Roof? New lighting fixtures? New driveway? Landscaping? Thank you.

    1. If you don’t have information about the value in 2000 at the date of death, you can ask a real estate agent or appraiser to do a retroactive valuation based on sales prices at that time. As for improvements, make a list of everything that was done, and what the improvements cost. Base that on receipts where available, and otherwise, your best estimate.

    1. IRS Publication 523 outlines the definition of a capital improvement. Examples of residential capital improvements include adding a bedroom, bathroom, or a deck. Other IRS approved projects include adding new built-in appliances, wall-to-wall carpeting or flooring, or improvements to a home’s exterior, such as replacing the roof, siding or storm windows.

  78. My father-in-law passed away a couple days ago. He and his wife owned four properties together; one primary home, a second home, and two rental properties. As us children are trying to set up my mother-in-law for her future financially and physically, how does she pay the least taxes when selling the homes. I understand the primary residence step up scenario mentioned above and the two of the last five years to make it a primary residence. My mother-in-law will not move into each home every two years to make each one her primary residence. Is the best plan to sell one home a year in vice selling all in the same year so as to not raise the her overall tax bracket that year? Does the step up rule apply to all four homes?

    1. The step up basis rule applies to all the real estate, to the extent it was owned by your father-in-law at the time of his death or held as community property with his spouse. So there shouldn’t be much in capital gains taxes to be paid, no matter when she sells the properties.

      1. Hi this has been an interesting blog. I hope you can help me. I live in California my husband and I owned a rental property for many years it was purchased for $80,000. It is now worth about $575,000. He died 6 years ago. He lived in the house when he died. We were separated but still married. Our children have been living in the house since he passed. I would like to sale the house soon. What would my tax consequences be? If I didn’t sale and rented it at full market value a for a few years, how would my tax consequence change?
        Thank you, ivy

        1. If the house was owned as community property at the time of his death, then it received a step-up in tax basis to the value at the date of his death. If it was not owned as community property, only his half would receive a step-up in value. If you sell it now, you’ll pay tax on the difference between the sales price less cost of sale and the tax basis. If you rent it out, you’ll pay tax each year on the net rental income less allowable depreciation. If you rent it out and then sell it, you’ll reduce the sales price by the cost of sale, the depreciation you claimed while it was rented and the tax basis. The portion that is from recaptured depreciation will be taxed at a federal rate of 25%, and the rest of the gain will be taxed at whatever federal capital gains rate applies, probably 15%. And there may be state taxes as well, depending on the laws of your state.

  79. My mother sold her home in 2019 and my father died in 1994. How would I determine the value of her home at the time of his death? Is this a costly fee?

    1. You can ask an appraiser to do a backward appraisal – I forget what it is called, maybe a historical appraisal. You’ll have to ask what the fee is. You possibly can get a real estate agent to run comps as of 1994 – I don’t know if they can, or if there would be a charge.

      1. My mother did not receive a 1099-s form. In her copies from the closing, there was a 1099-s information request form addressed to the title company, which I would figure is to let them know her ssn. I have contacted her closing attorney to ask if she was issued a 1099-s and he said it was in the papers at closing. I showed him the form was only an information request. I am not getting much help. I read not to ask for one if you didn’t receive one, but I am concerned we just didn’t receive it. She won’t have to pay taxes regardless (because of the inherited value of my fathers half of the house plus home improvements) but I would rather not open it up to review if unnecessary. Should I continue to pursue the tax form? Thank you for the help.

  80. WOW, great stuff, but still need one clarification as to the “community property step-up” versus if the primary residence was titled in a family trust as opposed to as husband & wife as community property…

  81. Elaine Polidoro

    I’m currently a widow, husband died in 2006. In 2019 I sold a rental house that he inherited upon his mother’s death in 2004. Neither him nor I lived in the house, it has always been a rental. I’m trying to understand my position regarding what capital gain tax rules would apply to my situation?

    1. You will owe federal tax at 25% on depreciation claimed since 2006, and the rest of the gain (the sales price less value in 2006) is taxed at federal capital gains tax rate, which is 15% for most people. You may also owe state income tax on the sale.

  82. My Mom sold the family home to my brother and me for $1 over 17 years ago but kept a Life Estate. So technically, I guess, she remained the “owner” until she passed. If I am correct, when she passed, it auto-transfers (I mean I have to go and get the new deed) to my brother and me.

    With that said, I’m assuming what you said above applies…. The house gets a stepped-up value to her date of passing (a few days ago) and if my brother and I sell it right away, the only capital gains would be the increase of value that occurred between the stepped-up value and the time of our sale to someone else. That should be little or nothing leaving us with no capital gains tax?

    1. If the house was in her name when she died, it will receive a stepped up basis to the value at her death. If it was in your names, then it won’t, I don’t think. But check with an attorney to be sure — I’m not one.

  83. Dear Ginita,
    Thank you for all advice you give to people and I hope you can help me as well.

    My husband and my youngest son died very unfortunately. I solely have mortgage on the house now. I have one child left my older son. I want to put my son as joint tenant so he can avoid probate in the future. We are wondering if that’s a good route instead of creating will/trust.

    Main question about future capital gains tax if something happens to m? and my son will need to sell the house right away.
    Initial price for house was $400,000 and I solely took mortgage on it and my name is only on the deed. Lets say I add my son to be co-owner as joint tenancy now. Let’s assume house evaluation will be $600,000 at time of my death.
    I understand my son’s cost basis will be $500,000 ($400,000/2 + $600,000/2 = $500,000). If he sells for that price of $600,000, then his base for capital gain tax will be $100,000 ($600,000 minus $500,000). Am I correct?
    I understand that if will/trust would be implemented, the cost basis will be stepped up to full $600,000 evaluation at time of death and therefore if sold for that amount, zero base for capital gain tax.
    But creating and then implementing trust can be complicated and costly. Our estate is small and simple. So we are wondering if joint tenancy can be good simple solution for now.

    Assuming the house is considered my primary residence and also it’s considered primary residence for my son and his wife for last 2 years.

    1) Will my son be able to claim $250,000 tax exemption? If yes, can he claim it if sold shortly after my death? Or will he need to live another 2 years in the house after my death in order to claim it?
    2) Same question as above #1 only about $500,000 marred couple exemption for my son and his wife since he’s married.

    Those above are most important questions
    Third question if you can help answer would be big bonus.

    3) Lets say house goes up in price up to $700,000 while I’m alive and I decide to sell it. I understand if I’m sole owner, then base for capital gain tax will be $300,000 ($700,000-$400,000). Even if I claim exemption of $250,000, I will still need pay tax on $50,000. What if I add my son as joint tenant, will he be considered co-owner and we each will be able to claim $250,000 exceptions?
    thank you

    1. I get your concern about taxes upon your death, especially given what has happened in your life. But it sounds as though you are fairly young, and likely will live a long time more, and I don’t know what the tax laws will be when you die. If they were the same as now, there would be a step up in basis to the value at your death if the house is in your name, and the house will pass in accordance with your will. If you do not have a will, it would pass in accordance with the laws of your state. A will is easy and inexpensive to create, you can do it online at relatively small cost. I don’t know what the cost of probate is in your state – but if it is high, then a trust may serve better than a simple will so that it bypasses probate. I’m guessing you’d only do that if you’d save money by doing a trust.
      If your son has owned and occupied the home for 2 years when he sells it, then he would qualify for the capital gain exclusion. If not, then he won’t. So the answer to whether you can add your son to the deed and then sell it, the answer is yes, once he’s owned and occupied it for two years. His wife can allow her exclusion to be used for the sale even though she hasn’t owned it upon sale, as long as she lived there for two years. All that said, I don’t know all the details of what you are dealing with and how the law will affect you, so be sure to talk to your own advisor before you do anything.

  84. Looking for guidance. Bought a home in April 2019 for 250,000. My husband unexpectedly died in July 2019. I could not stay in the house and sold it in September 2019 for 357,000. So we only lived there for 5 months. Am I figuring this right…… my husbands stepped up value would be 187,500?? That is half of the 357,000. And my half would be based on the 250,000 we purchased the home for….125,000??
    So…. 187,500 +125,000=312,500. Then the sale price of 357,000-312,500=44,500. So am I correct that I will owe capitol gains on $44,500?? So approximately $ 6,675??? If I’m in the 15% bracket
    Help!! Thank you !

    1. That is correct, except that the tax basis for his half is 50% of 357,000. And since your holding period and residency period was cut short because of the subsequent sale due to his death, you should be able to claim a prorated portion of the $250,000, exclusion that is 5/24 of it (5 months divided by 24 months (two years)). And it seems to me that on a joint return for the year of death (2019) you would be able to claim an identical exclusion for him. Check with a tax adviser to be sure. And also, be sure you have the purchase price correct – you say the home went up 42% in just five months. If you increased the value by making improvements, be sure to include the cost of those improvements in your tax basis computations.

      1. We purchased the home from a friend at below market value. So the purchase and sale prices are correct. Could you please explain the prorated portion and and the exclusion a little more? Sorry!! I am not exactly sure why that means. Thank you so much for your help.

        1. If the exclusion is $250,000, and you have lived there only 5 months, you can’t claim the full exclusion. You can claim a prorated portion, that is: 5/24 of it (5 months divided by 24 months (two years)). The fraction 5/24 is 21%, so you can claim 21% of $250,000 which is $52,500. That means you can exclude $52,500 of the gain from taxation.

          1. So if understand correctly…..my husbands stepped up value is half of the 357,0000=178,500. Mine is half of the purchase price of 250,000=125,000
            178,500 + 125,000=303,500. Sold the house at 357,000-52,500 for 5/24 of exclusion=304,500.
            178,000+125,00=303,500. So…..304,5000-303,500= 1,000

            With the exclusion included does this seem correct?
            Thank you so much for your advice. This has been such a hard time in my life and finding answers hasn’t been easy. You have given me more help than I have been able to get from my realtor, investment person, or a CPA. Thank you so much!

  85. Great site, love your easy to understand responses.
    My father-in-law passed away this past October and at the time he owned a rental property. The deed of the property is titled under his trust where my mother-in-law is beneficiary. She is vehemently telling all the children that she won’t have to pay capital gains because she never owned the house, only her spouse did. She also says she confirmed this with a lawyer. While I doubt the government would let that slide, is there any truth to what she is saying?

    Also, seeing as this was a rental property was a depreciation schedule required? (if so I need to find history of it)
    Thanks and have a great day.

    1. If the house has now passed to her as the beneficiary, then she will need to report the sale of it on her tax return. If the house is still owned by the trust and the trust sells the house, the trust will have to report the sale on its tax return. You are right, the government will hold the rightful owner responsible for reporting the sale and paying any taxes due (though the house likely received an increase in tax basis to the value at the date of the deceased person’s death, so the taxes won’t be much and possibly zero if it is sold for the same as the value at date of death). On your father in law’s tax return, he likely reported the income, expenses and depreciation on Schedule E. So that’s where you can find the history. The accountant has the depreciation schedule, or the program used for preparing the return can produce it.

  86. Hi Ginita,

    This question pertains to my mother and father.

    My father owned there primary home since 2006 in CT. He passed in July of 2018. He was the only person on title and mortgage. My mother is the executor of his will and I don’t believe she has a right of survivor-ship to the property. Right now she is in contract for the sale of the home in April of 2020 and shes looking to buy another home. I’m not sure what the value was at his time of death if was to guess it was 200k (Thats what they bought it for in 2006) and shes having it sold for 238k, mortgage still has about 155k left on it. So with step up its 200k, Gain is 238k (38,000 gain) then shes buying another home to downsize at the same time 150k to 200k. Probate is almost done, the sale of the house is the last step

    Does she qualify for the married tax exemption of 500k since they filed married jointly for all the years prior? even though she wasn’t on mortgage or deed of the home in a non community property state? Also her income is 50k a yr.

    Will she be incurring a capital gain tax or any other tax, is she exempt?

    Your answer will be greatly appreciated, Thank you so much!

  87. My mom bought her home for $16K now it could sell for $400k that was in the 60’s we switched the to are name it’s been 4 months my wife and I make under $37000. Do get a tax break on capital gains or do we get hit hard because of living in the home for less than 24 months. Can you give me any advice also we want to buy a home in Michigan.

    1. In order to claim the $250,000 exclusion on the gain on sale of your residence, you need to have listed there for 2 of the prior 5 years. If you don’t, then you will have to pay tax on the gain when you sell it. Since your income is so low, some or all of the gain may qualify for a zero tax rate, and the rest will be taxed at a 15% federal tax rate.

  88. My mother did not receive a 1099-s form. In her copies from the closing, there was a 1099-s information request form addressed to the title company, which I would figure is to let them know her ssn. I have contacted her closing attorney to ask if she was issued a 1099-s and he said it was in the papers at closing. I showed him the form was only an information request. I am not getting much help. I read not to ask for one if you didn’t receive one, but I am concerned we just didn’t receive it. She won’t have to pay taxes regardless (because of the inherited value of my fathers half of the house plus home improvements) but I would rather not open it up to review if unnecessary. Should I continue to pursue the tax form? Thank you for the help.

  89. Good Morning I am sure you must have answered this previously. We have been in our house for 26 years. My husband passed 02/11/11 at the time of death only his name was on the deed. We did have a quick claim previously notarized adding my name on in case something ever happened. This was filed with the county after his death. Now in 2019 I sold my home. My question is since I wasn’t on the deed until after he passed wouldn’t I use the stepped-up basis or Date of Death value? I have no idea how much it was originally purchased for so many years ago. Also since I didn’t know I had to have date of death value do I find an appraiser to determine that for my income taxes? I know there is $250K exclusion any help would be appreciated..


    1. At the time of his death the property tax basis stepped up to the value at the date of his death. So your tax basis is that amount plus the cost of any improvements since then. You can ask an appraiser to do a backward valuation (there’s a technical name for that but this gets the point across), or you can look at the trend for the property on a website such as Zillow and apply that percentage change to the current price/sales price to arrive at the value at date of death.

  90. Ginita, I needed to thank you for your advice on Capitol gains. The information you shared with me, gave me the confidence in myself to stand up to my tax preparer when she showed me owing $8,000 in Capitol gains. Because of your advice, I told her I should owe $0 in Capitol gains. She bristled a bit, but said she would check into it. Turns out….I owe $0. I cannot express how grateful I am. You are so right….a man is not a financial plan. My husband died…..leaving me at 57, to take care of finances for the first time. I am on a mission to educate myself and get to the point of confidence in making my own financial decisions….until I get to that point….
    I have one more question for you and I am hoping you can advise me….my husband had rolled over the majority of his 401(k) into an annuity with Nationwide. But after that, he continued to contribute weekly to his 401(k). So upon his death there was money that needed transferred into an account in my name. So I had the gentleman at Nationwide that my husband purchased the annuity from, help do the paperwork to get this money transferred. Two weeks ago I received a check in the mail for the balance of his 401 (k) minus taxes. The paperwork either didn’t get filled out properly or in the required time frame. The balance in the account was about $18,000. Balance of the account minus taxes was about $14,500 My tax preparer told me I have 60 days to come up with and replace the taxes that had been taken out and deposit it and the check into an IRA. She said if I don’t I have to claim it as income for 2020 and I will receive a penalty on my taxes for early withdrawal. My question is this…. taxes were approximately $3,500…. what should I do…. come up with and replace the taxes and deposit it? Or just take the penalty? It has already cost me $3,500 in taxes that I can’t get back correct? The tax preparer told me to ask the Nationwide rep that helped me, how to get the tax money back. She seems to think he should be responsible for it?? So…do I just deposit the check in my money market for now and take the penalty? Or do I take the hit with the taxes, come up with the extra money and deposit it into an IRA? Thank you so much for your invaluable advice!

    1. OK, consider that it might be time to get a new tax preparer/adviser. You do not owe an early withdrawal penalty on distributions made to you from a 401(k) on account of the death of the employee. Refer your tax adviser to Internal Revenue Code Sec 72(t)(2)(A)(ii) – it is very clear there.
      If you replace the taxes and deposit the $18,000-ish funds into an IRA in your name within 60 days from the date of distribution to you (which likely is earlier than the date you received the check in the mail), then that will not be income on your tax return. You will be able to claim the $3,500 they withheld for taxes as withholding on your tax return and credit it against your taxes on the return, and that will likely result in you receiving a refund of most or all of the $3,500 when you file your tax return next spring.
      If you take the $14,500-ish that you received and put that into an IRA in your name within 60 days, then that will not be income on your tax return. But the $3,500 will be income on your tax return, since you didn’t replace that. The taxes on that $3,500 will be $1,000 or so, and the withholding was $3,500, so you’ll still get a refund of all or most of the $2,500 difference.

      1. Once again, Ginita, thank you so much for your advice. You always explain things so thoroughly and I and I come away with a good understanding. I feel like I am surrounded by people that don’t know what they are doing….hence why I went in search of and found YOU. It is frustrating and frankly a bit scary to think that my finances and retirement are in the hands of people I don’t feel good about. My husband fully trusted both my tax person and the person at Nationwide…. I was always there to sign the paperwork without much thought, because I trusted my husband, who was a smart man and he loved numbers and calculating for retirement etc. But, now that I am in charge of my own financial future, I am finding these people to be inadequate. I have gone to the library and checked out tons of books on retirement and taxes etc. and will be reading everything I can get my hands on. I searched online and was lucky enough to to run across your website, of which I intend to read every article and blog on here, in an attempt to educate myself. I will once again follow your advice…on my to do list……find a new tax advisor and a new person to manage my retirement account. Thank you thank you!!

  91. Hi my mom sold her house in a revocable trust for 399,000. They bought it in 1969 and he passed on November 19, 2010 (estimatesd value of house at his death about 140,00 plus improvements over the years. New roof 3x’s, new windows, added central ac and later central heat, etc) Will she need to pay capital gains? She lives on social security and does not file taxes yearly. Will she need to file because of the sale?

      1. If she passes away before year end, then the rules would be the same as I stated, and if she were required to file a tax return the executor of her estate or administrator of her trust would file a tax return for her and sign it as executor or administrator.

    1. If I take the sales price of $399K and subtract the value at her husband’s date of death of $140K, I get $259K. She can exclude up to $250K on the sale of her residence, and I’m guessing the costs of sale and the costs of improvements since her spouse’s death are higher than that, so no, she won’t owe capital gains taxes. If she signed a form in escrow that said she didn’t expect to owe taxes, then she won’t receive a 1099 form showing the sales price of the home, and she won’t have to report the sale on a tax return. If she didn’t sign that form, then she will get a 1099 form and will have to report the sale (but won’t owe any taxes for the reasons I stated).

  92. Jeffrey Rothstrein

    When a spouse inherits a house which is 50% rented and 50% used for personal can the stepped up basis be used for depreciation? Are there any statements which must accompany the tax return?

  93. My husband died last year (8 months ago). I have now decided to sell our home which we owned and lived in for the last 20 years. We owned the home jointly and our wills leave everything to the surviving spouse. I want to know several things: 1) Do I have to take his name off our mortgage before I can sell:, 2) Do I have to take his name off the deed before I can sell?, and 3) Will I have to pay capital gains on the proceeds which should be about $200,000?

    1. You will not need to take his name off the mortgage — paying it off through escrow will extinguish it. Since the home was left to you, it is likely that the escrow company or attorney who handles the sale will cause the property to be titled in your name alone before the sale, to fulfill on that provision of the will. At least one-half of the property received a stepped-up tax basis to the value of the home upon his death, and possibly the full property did, depending on how title was held, and whether you live in a community property state.

      The proceeds from sale have nothing to do with the taxable gain. To determine the taxable gain, you will take the sales price, subtract costs of sale, and subtract your tax basis, which will be either the value at the date of his death or else half the value at the date of his death and half the cost of the property and improvements. From the resulting gain, you can subtract $250,000 since it was your principal residence. So I doubt there will be any taxable gain.

  94. Hello
    My mother in law was widowed early last year. She owns her home jointly in California with her husband since the 1980s as her main home.
    I understand she gets a stepped-up basis when she goes to sell but is that for only half the value? She pays on the full gain for the other half?
    Is this separate from or related to the rule about selling within two years of his death? I am having trouble seeing where this fits in. Ideally, I think she’d prefer not to sell so soon but she needs to know the pro’s and con’s.
    Thanks for this website. It is a great resource.

    1. If the home was community property, then both her half AND his half received a stepped up tax basis to the value at the date of his death. In addition, when she sells, she can claim a capital gains exclusion of $250,000. She could also claim his $250,000 exclusion if she sells soon after his death, but given the stepped up basis plus her $250,000 exclusion, she probably doesn’t need to claim his exclusion, so she won’t be hurt by holding onto the property and selling sometime in the future.

      1. Many thanks. So, I will ask her to run the numbers with her CPA. Will she gain his $250k exclusion (in addition to her own and the two step ups for each half) only if she sells within 2 years of his death?

          1. Thanks. I guess that only matters if increase since death exceeds $250k within 2 years, which I imagine is quite rare. Does that make sense? sorry for the follow up. Your site is a great service.

  95. Original property was inherited in the early 70s– so we do not have a purchase price. Husband died 20 years ago and the appraised amount then was 500,000. Widow sold the house recently and after expenses received 800,000. How do we figure out the capital gains? Thank you.

    1. If the property was held as community property or in husband’s name alone when he died, the tax basis would be the value at his death, $500,000. If not, then the tax basis of the inheritance of his half is $250,000, and the tax basis of her half is 50% of the value of the property when it was inherited in the early 70s.

  96. How is the basis calculated if the property was bought together as land only and then built together? My husband died after the home was fully constructed.
    Thank you,

    1. The tax basis before his death would have been the cost of the land plus the cost of the construction. Part or all of the property received a stepped-up tax basis to the value at the date of his death, if that exceeded the cost tax basis.

  97. Hi. I understand an appraisal is needed for the residence of the widow to claim the step up basis (is it only for the main residence or does it also cover investment property?). Can any licensed appraiser be used? Or is one approved by IRS needed? Also, do they need access inside the property or do they do it from drive bay or online street view and comparable stats, etc? Not sure how to go about finding one so grateful for any guidance.

    1. You may use any means that establishes the value at the date of death for real estate owned by the deceased. That could be a full blown appraisal, or a market value analysis by a knowledgeable real estate agent. You would have to check with the person giving you the value as to what access they need.

  98. If deceased spouse was nonresident and surviving spouse is US citizen/resident, does it make a difference for step up claim or for any IRS filings on death? I understand Form 706i must be filed within 9 months of death but this was not done as intestate administration has not yet issued overseas and we only just found out about this as part of tax season in US. Are penalties likely very high?

    1. This is a specialized area, and I do not have sufficient knowledge to answer your question — sorry. I suggest you ask a tax specialist with specific knowledge regarding this subject matter.

  99. Sorry for a basic question but if widow decides not to sell immediately after spouse’s death, is there a deadline by which she must claim step up, or is it enough to claim it at time she goes to sell the home, even if it is years later?

      1. Thanks. I guess that makes sense in that it is only then that the issue of a gain arises? Of course, the longer she leaves it, the more approximate the value, I suppose.

        1. Ideally, she will establish the value at date of death soon after that death, which she can do by asking a real estate agent for a market analysis or through appraisal. If she fails to do that, later on she will have an appraiser do a historical appraisal later to determine the value as of the date of death. And the value when sold is not approximate, it is the true value that a willing seller will pay a willing buyer, which is the definition of value.

  100. I’m so sorry to ask one more but my mother in law thought her CPA said she had to file the appraisal for step up along with the report of death in 2919 on her 2019 tax return. Is she conflating 2 different things perhaps?

    1. Your mom should definite do what her CPA says she must do, but I think that perhaps she misunderstood the CPA. The only requirement I know about is to attach a report of tax basis to the Form 706 Estate Tax return, but that return isn’t due unless the estate exceeds $11 million, which I’m guessing it doesn’t in your mom’s case.

  101. Hello Gina
    When it comes to step up basis, is family home treated different from a rental income property? I understand the appraisal for the step up basis can be done any time for the family home prior to sale, but is there any reason why it should be done sooner for the income property?

    1. Certainly real estate can be appraised “backwards” to ascertain a value sometime in the past, but I believe that contemporaneous appraisals that are done as close to the date of death as possible are more convincing evidence of value. And you should definitely establish a contemporaneous value for income property you inherit so you can use that value for depreciation purposes.

Leave a Comment

Your email address will not be published. Required fields are marked *

Sign Up for the WIFE.org Newsletter

Get a Free Bumper Sticker!

Scroll to Top