From 24/7 Wall St. · David Beren · · 1m 40s
California Home Tax Reset After Spouse Dies
Community property law resets home basis for both spouses after death, letting survivors sell with minimal tax.
In brief
Community property law resets home basis for both spouses after death, letting survivors sell with minimal tax. When a spouse dies in California, community property law resets the home's tax basis for both halves, allowing the surviving spouse to sell with almost no capital gains. Originally reported by 24/7 Wall St..
California Home Tax Reset After Spouse Dies
A California couple buys a modest house in 1984, watches it grow into a seven-figure asset, and then one spouse dies.
Community Property Resets Tax Basis
Under community property law, both halves of the home reset to fair market value at the first spouse’s death, wiping out most capital gains.
Tax Basis Reset Example
If a house cost $100,000, was worth $1.5 million at death, and sold for that amount, the community property survivor has almost no gain.
Community Property States
California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are the nine community property states.
Title Matters for Reset
California couples holding title as joint tenants may get a step-up only on the deceased spouse’s half unless they have community property with right of survivorship.
Selling Within Two Years
A surviving spouse who sells within two years of death and hasn’t remarried may exclude up to $500,000 from capital gains tax.
Double Reset Risk
If a community asset is worth less than its basis at death, both halves step down, and the survivor loses any built-in loss she could have deducted.
Steps to Secure Reset
Pull the deed, confirm title, order an appraisal, and check the home-sale exclusion for minimal tax impact.
At a glance
When a spouse dies in California, community property law resets the home's tax basis for both halves, allowing the surviving spouse to sell with almost no capital gains.
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