How to Sell a Property in California and Legally Reduce Taxes
Selling a house in Los Angeles County or anywhere in Southern California? The real question isn’t “What’s my price?” It’s “What do I keep?” The same dollar can be taxed heavily as wages, lightly as long-term gain, or not at all under the home-sale exclusion. How you sell can matter as much as your price.
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Please note: This is general information, not tax or legal advice. Consult a CPA or attorney about your situation.
Find your situation
- You inherited a house. Start with the step-up in basis and Prop 19. If no one will live there, selling is often the better choice. See selling an inherited interest and probate house sales.
- You’re selling the home you live in. Look at the home-sale exclusion first. A few months short of two years? An option may lock in a buyer while you wait.
- You own a rental. Compare a 1031 exchange, a deed-for-deed trade and an installment sale.
- You want income, not a lump sum. Read about seller financing and a charitable remainder trust.
Eight legal ways to reduce or defer taxes
| Strategy | What it can do | Often fits |
|---|---|---|
| Step-up in basis | Resets an heir’s basis to value at death | Heirs selling an inherited home |
| Prop 19 | Decides whether a child keeps a parent’s property-tax base | Heirs deciding to keep or sell |
| Section 121 exclusion | Excludes up to $250,000 / $500,000 of gain | Homeowners, surviving spouses |
| Installment sale | Spreads tax over the years you’re paid | Owners who want monthly income |
| Options and lease-options | Locks in a buyer, closes later | Sellers waiting on a date |
| 1031 exchange | Defers tax when you buy other investment property | Landlords |
| Deed-for-deed exchange | Trades properties directly | Owners of several rentals |
| Charitable remainder trust | Sells inside a trust and pays you income | Older owners, paid-off property |
Two California basics for almost every sale
Withholding (FTB Form 593). Escrow generally withholds 3 1/3% of the price for the state. That isn’t required if the price is $100,000 or less, the property is in foreclosure, or you certify an exemption (for example, a qualifying principal residence or a sale with no gain). It’s a prepayment; you settle up on your return.
Transfer taxes. LA County charges $1.10 per $1,000 of price, and the City of Los Angeles adds 0.45%. For City of LA sales closing after June 30, 2026, Measure ULA takes 4% on sales over $5,400,000 and under $10,900,000, and 5.5% at $10,900,000 or more, on the whole price. The thresholds adjust each year, and other Southern California cities have their own rates.
How we fit in
SoCal Property Resolution works with Southern California families on inherited homes, probate, co-owner disputes and property-tax problems. We’re not tax advisors. We can walk you through your sale options so you can bring the right questions to your CPA or attorney, and there’s no obligation.
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“I’m Erwin Miciano. I started SoCal Property Resolution because the families I met weren’t looking for a flashy cash offer. They were stuck: a house split between relatives, a probate case that wouldn’t move, a tax bill nobody knew about. My job is to explain your options honestly. Sometimes that means buying, and sometimes it means pointing you somewhere else.”
Frequently asked questions
What is the best way to avoid capital gains tax when selling a house in California?
There is no single best way. It depends on whether it’s your home, a rental or an inherited property. The home-sale exclusion, step-up in basis, 1031 exchange and installment sale are the most common starting points.
Does California tax capital gains differently?
Yes. California taxes the gain as ordinary income, up to 13.3%, so state tax can be a big part of the bill.
Is the 3 1/3% California withholding an extra tax?
No. It’s a prepayment toward your state tax. You settle up when you file your return, and some sales are exempt.
Can I combine strategies?
Often, yes. For example, an option can buy time to qualify for the home-sale exclusion, and heirs often rely on the step-up when deciding under Prop 19 whether to sell.
Talk it through with someone local
Confidential, no pressure. Mon–Fri, 10am–5pm · info@selltosemi.com
Get My OptionsCall (619) 996-0830This is general information, not tax or legal advice. Consult a CPA or attorney about your situation. SoCal Property Resolution is a real estate investment company that may buy property or ownership interests as a principal. We are not attorneys, tax advisors, real estate agents or a government agency. Figures were checked October 2026 and change over time; confirm current rules with a qualified California CPA or attorney before you act.
