Avoiding Tax Traps in a Sale
What you walk away with after a sale isn’t just about the price.
It’s about what’s left after taxes.
Far too many homeowners give away thousands, sometimes hundreds of thousands, because they didn’t ask the right questions early enough.
You can’t avoid taxes by accident.
But you can minimize or eliminate them with smart planning.
And that planning starts now, not at escrow.
The $250,000 / $500,000 Exclusion Rule
If you’ve owned and lived in your home for two of the past five years, you may qualify to exclude up to $250,000 (single) or $500,000 (married) of capital gains from taxes.
But this rule isn’t automatic.
When the Exclusion Starts to Break Down
If you moved out, the clock starts ticking.
If you remodeled, you must document costs to claim them.
If you’re selling quickly or after a divorce, the timeline may not count.
Don’t assume you’re covered. Verify early.
The IRS Doesn’t Care Why You Moved
Moved out?
Rented it?
Left due to medical reasons?
The IRS doesn’t care.
Unless you qualify for a partial exclusion, you may owe taxes on the full gain. Most sellers aren’t warned until it’s too late, and it’s not your accountant’s fault.
It’s because your real estate strategy wasn’t designed to protect you.
Inherited Property and the Step-Up Rule
If you inherited the home, you may benefit from a stepped-up tax basis.
That means you only pay taxes on gains after the previous owner’s date of death, not on decades of appreciation before it.
What Happens When Parents Add Kids to Title
If a parent adds a child to the title during their lifetime, the step-up is lost.
The child inherits the original purchase price and can be hit with massive capital gains when they sell.
Trying to “plan ahead” by adding children to the title is one of the most expensive tax mistakes families make.
Medi-Cal Recovery: The Quiet Killer of Legacy
Used Medi-Cal for long-term care?
The State of California may come after the estate to recover costs.
Even if the home is fully paid off, it is fair game if there is no living trust in place.
The state does not care that it was your family home.
They want the money.
Unless the title was transferred correctly before death, your heirs could lose the property.
This isn’t a maybe. It’s the law.
Depreciation Recapture and Rental Conversions
If your home was ever rented, even for a few years, you likely claimed depreciation.
Now the IRS wants it back.
This is called depreciation recapture.
It’s not a gotcha. It’s what happens when strategy is skipped.
If you don’t plan for it early, it can reduce your net proceeds by tens of thousands.
The Silent and Deadly Tax Killers
What Most Sellers Never Hear in Time
Most sellers don’t lose money because of price.
They lose it because nobody told them:
That the IRS doesn’t care about your story
That Medi-Cal could take the house
That inherited homes lose the step-up if the title is handled incorrectly
That renting a home changes your tax profile
Those two years of occupancy could save you $100,000
That depreciation claimed years ago comes back as a bill
This page isn’t fear.
It’s prevention.
A Message to Baby Boomers
The System You Trusted Is Not Built to Protect You
You were told to pay off your home. And you did.
But now the very system you trusted, the bank, the IRS, the state, has rules designed to claw it back.
Equity isn’t safe by default.
It’s safe by strategy.
Don’t live modestly, hand the keys to your kids, and leave them with a tax bill that could have been avoided with one informed conversation.
Before You Schedule a Strategy Call
When you book a call, I’ll ask for a few essentials:
How long have you owned and lived in the home
Whether it was inherited, gifted, or ever rented
Whether you’ve made improvements, and if they’re documented
Whether you or a family member received Medi-Cal benefits
Most agents are trained to build rapport, not to do due diligence.
They pass the hard questions to the CPA, the lender, the inspector, the appraiser, or anyone but themselves just to stay clean and look polished.
That’s not what I do.
I ask the hard questions upfront, not to dig, but to defend.
Because you can’t protect your equity by being polite.
You protect it by being prepared.
Book Your Equity + Tax Strategy Call
No fluff. No theory. Just clarity that protects your legacy.
