Tax on Home Value Transfer to Kids
As you seek to help your children, your home offers the greatest value and tax implications.
A common question homeowners face is whether to sell the house and gift the proceeds, or transfer the property itself. At first glance, selling and giving cash seems like a clean solution. In many ways, it is—but the tax story deserves a closer look.
If you give your home directly to your children, there are generally no immediate income tax consequences for you. However, you may be required to file a gift tax return if the value exceeds annual exclusion limits, and the gift may apply against your lifetime estate and gift tax exemption. Your children will inherit your original purchase price as their tax basis (known as “carryover basis”), along with the embedded capital gain—potentially passing large future tax consequences.
If you sell your home to a third party—and pay any applicable capital gains tax—then gift the remaining proceeds to your children, they can use that money to purchase their own homes at current market prices. If and when they sell their own home, they would pay capital gains tax on the difference between what they paid for their home and what they sold it for.
Beyond capital gains tax, there is property tax to consider. Under Proposition 19, a transfer of a primary residence to a child avoids full reassessment only if the child uses the home as their principal residence. Even then, the exclusion is limited: if the market value exceeds the parent’s taxable value by more than $1 million, a partial reassessment will occur.
This discussion focuses on wealth transfer during your lifetime. If instead you hold the property until your death and pass it through your estate, your children will receive a step-up in basis to fair market value at the date of death, which will eliminate capital gains tax on prior appreciation.
There are other methods of transferring your home’s wealth—such as selling directly to your children below market value or carrying the financing—that involve additional tax and legal considerations which I’ll cover at another time.
April Market Update
San Mateo County saw the Median Sold Price of a single family home rise 2% from $2,167,000 to $2,200 between March and April, up from $2,118,000 in April of 2025. Between March and April, Average Days to Sell dropped from 19 to 18 (20 last April), Sales Price to List Price ratio decreased from 109% to 107% (107% last April), Months of Inventory dropped 1.6 to 1.5 (1.6 last April), and Active Number of Homes rose from 520 to 591 (613 last April).
According to Freddie Mac's Primary Mortgage Market Survey for the week ending 4/30, the 30-year fixed-rate mortgage averaged 6.30% up from last week when it averaged 6.23%. Rates have decreased from 6.46% in March, a peak last seen August, 2025. A year ago at this time, the 30-year FRM averaged 6.76%
I am a licensed REALTOR® for KWPE, not a tax professional. This content is not intended as tax advice.