Step-Up in Basis: Selling an Inherited House in California
If you’re in this spot: you inherited a house your parents bought decades ago, and you’re worried about a huge capital-gains bill. There may be little or none.
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Please note: This is general information, not tax or legal advice. Consult a CPA or attorney about your situation.
How it works
Inherited property generally gets a new tax basis equal to its value on the date of death (IRC §1014). Sell near that value and there’s little gain, however little your parents paid.
Key rules
- Appraisal. Get one dated near the date of death; it’s your proof.
- Long-term by default. Inherited property counts as long-term no matter how soon you sell.
- Estate tax. Federal estate tax only applies above $15,000,000 per person (2026), and married couples can generally combine up to $30,000,000. Most families owe nothing.
- No step-up for lifetime gifts. If a parent deeds the house to a child while alive, the child usually keeps the parent’s old, low basis.
California notes
California has no estate or inheritance tax and follows the step-up.
For community property, both spouses’ halves can generally be stepped up when the first spouse dies, so how title was held matters. Property tax is a separate question: see Prop 19 and inherited homes.
Common mistakes
- No date-of-death appraisal
- Adding kids to title “to avoid probate,” which can lose the step-up
- Holding for years and losing the low-gain window
Example (hypothetical)
Mom bought in 1980 for $60,000. The home is worth $850,000 at her death, and the children sell 8 months later for $860,000. The gain is about $10,000 before selling costs, not $800,000.
Siblings can’t agree on selling? See when a co-owner won’t sell. Back to the full guide to selling in California and legally reducing taxes.
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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
Do I pay capital gains tax when I sell an inherited house in California?
Often little or none. The basis generally steps up to the value at the date of death, so tax applies only to the gain after that.
Does California have an inheritance tax?
No. California has no estate or inheritance tax, and federal estate tax only applies above $15,000,000 per person (2026).
What if my parent added me to the title before they died?
A lifetime gift usually keeps the parent’s old, low basis, which can lose the step-up. Talk with a CPA.
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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.
