What Are the Tax Implications of Selling a Probate Property in California?

Selling a probate property in California can trigger capital gains tax, property tax reassessments, and in some cases, estate tax obligations. The key factor is the property’s “step-up in basis,” which allows heirs to avoid paying tax on the deceased’s original purchase price. Always consult a CPA or probate attorney to understand your specific situation.

What taxes apply when you sell a probate property?

When a property is sold through probate in California, the estate or heirs may face several types of taxes:

• Capital Gains Tax
  Only applies to the difference between the sales price and the property’s fair market value at the date of death.

• Step-Up in Basis
  The property receives a step-up to current market value, minimizing capital gains for heirs.

• Property Tax Reassessment (Prop 13)
  Transfers between parent and child may avoid reassessment if a claim is filed timely (Prop 58/Prop 19).

• Estate Tax (Rare)
  Only applies to very large estates exceeding the federal exemption limit (over $13.61M in 2024).

Does the estate pay the taxes, or do the heirs?

• If the estate sells the property before it’s distributed, the estate pays the taxes.

• If the heirs receive the property and then sell it, the heirs are responsible for capital gains taxes.

How does the “step-up in basis” protect you?

Let’s say your parent bought a Pasadena home for $200,000, and it’s worth $1.2M when they pass. The “step-up in basis” means the new cost basis is $1.2M. If you sell it for $1.2M, there’s no capital gain to tax.

Are there special rules for inherited property in Los Angeles?

Yes. Los Angeles County offers:

• Prop 19 parent-child transfer benefits (file within 3 years)

• Supplemental property tax bills based on reassessment timelines

• Local CPA and attorney networks who specialize in probate-specific tax planning

Can I deduct repairs or selling costs from the gain?

Yes the IRS allows you to deduct:

• Realtor commissions

• Escrow fees

• Staging and prep expenses

• Legal fees related to the sale

These reduce your taxable gain, especially helpful if the property appreciated post-death.

How to avoid costly tax mistakes when selling inherited property?

Here’s what to do:

1. Get a date-of-death appraisal

2. File Prop 19 exclusion forms ASAP if parent-to-child

3. Work with a probate-savvy CPA

4. Track all sale-related expenses

5. Consult your probate realtor we often work alongside tax pros

Why Los Angeles families trust us for probate sales

At The Borges Real Estate Team, we specialize in helping heirs sell probate properties without surprises. We coordinate with tax experts, attorneys, and local appraisers to ensure every step from valuation to closing is smooth and tax-smart.

Whether you're selling a Craftsman in Pasadena or a duplex in Highland Park, we’ve got your back.

Contact our probate team today!