From 24/7 Wall St. · David Beren · · 1m 30s
House Title Determines Tax Reset
Spouse's home title resets tax gains entirely or half depending on ownership.
In brief
Spouse's home title resets tax gains entirely or half depending on ownership. When a spouse dies, home title determines if tax gains reset to zero or half. Originally reported by 24/7 Wall St..
Title Determines Tax Reset
Which spouse holds the title determines whether decades of home appreciation vanish from your tax bill entirely or only halfway.
Tax Basis Reset Rule
When the titled spouse dies and leaves the home to the survivor by will, the survivor gets a step-up in basis on the whole house.
Joint Ownership Half Reset
Couples who hold title jointly usually get that reset on only half the home.
Basis Calculation Example
A jointly owned home with an adjusted basis of $50,000 and a fair market value of $100,000 leaves the survivor with a new basis of $75,000.
Full Reset Conditions
You get the full reset if the deceased spouse owned the house outright and it passed to you by will or inheritance.
State Variations
In Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin, community property gets a full reset.
Estate Tax Deductions
A house left to a spouse is deducted from the estate under the marital deduction in 26 U.S.C. § 2056(a).
One-Year Gift Rule
Section 1014(e) blocks transferring a jointly owned home into the ill spouse’s name to get the full reset.
Timing Matters
The full reset happens only if the spouse on the title dies first, and the house passes through probate.
The headline
When a spouse dies, home title determines if tax gains reset to zero or half.
