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These days, it takes powerful motivations to convince older homeowners to sell their property—and more than half say they’ll never do it.
For those who do sell, the reasons include accessing their home’s equity for healthcare costs, wanting to escape the burdens of upkeep and maintenance, or seeking a quieter life in a warmer climate.
But there is another reason increasingly in play: grown kids who need help.
As the baby boomer generation finally settles into retirement, many of them have children who already have or are planning to have families of their own. And there may not be a more valuable asset to leverage in support of the next generation—and the ones to come—than their homes.
Why some people sell, and some people don’t
Baby boomers collectively hold between $18 trillion and $19 trillion worth of real estate across the country—about double what millennials claim, according to analysis from Realtor.com.®
If you’re part of that generation, and you’re hoping to pass your wealth along with “warm hands” rather than cold, what’s the best way to do it without taking a major tax hit?
“When you’re thinking about selling your home, it’s usually because you want to preserve the
value of the asset and pass something on to your children. But the way and timing of the sale
can carry very different tax consequences,” says Laura Cowan, an estate planning attorney and
founder of 2-Hour Lifestyle Lawyer.
That’s because how and when you transfer the home—whether during your lifetime or after your
death—directly affects how much your heirs may owe the government.
If you give your kids the home while you’re alive, they inherit your original purchase price, which can lead to big capital gains taxes later. If they inherit it after your death, the value gets “stepped up” to market price, often reducing or eliminating those taxes.
“Each situation is different. For instance, if the kids don’t plan to sell the house anytime soon, it might not matter as much right away,” says Cowan. “But generally speaking, the step-up in basis can provide a much better tax outcome.”
Take, for example, a homeowner who bought a median-priced home in 1985 for $82,800. That median-priced home today is likely worth $423,100. While this might sound like a big payday if they sell, depending on their circumstances, as much as $90,000 of the profit could be subject to capital gains tax. However, if the home is inherited after death, that tax may not apply, thanks to the step-up in basis.
This means that, in many cases, it is more tax-advantageous to give with “cold hands,” as
creepy as that sounds.
You’ve decided to sell—what will that mean for the bottom line?
That said, the most tax-effective strategy isn’t always the most practical or useful. If sharing a smaller gift with your children today helps them buy their own family home tomorrow, that may be better than waiting until you’re passed to share a larger nest egg.
If you do decide to sell your home and pass the proceeds on as a gift, an estate planning attorney and a certified financial planner can make sure your plans are legally enforceable, reduce probate complications, coordinate your assets, and maximize tax efficiency, like ensuring you write off all of your home improvement costs against the sale.
The major expense that selling your long-time home will incur is federal long-term capital gains tax, which will vary depending on your tax bracket, as well as state capital gains tax, which is taxed as income.
You may qualify for the $250,000 exclusion—or $500,000 exclusion if you’re married and filing jointly— but everything else is subject to capital gains. As it stands now, about 29 million households would pay that tax if they sold their primary residence today.
Once you know your net proceeds, the question is how to best share that money with your heirs.
In general, there are no special vehicles or means to give your children money for specific purposes, like buying a home of their own. A gift is a gift, according to the IRS.
The 2025 annual exclusion is $19,000 a year, meaning you can give a child up to that much without thinking about taxes or paperwork. Your spouse could also contribute $19,000 a year to a child. And if you want to exceed the limit, that’s fine—you’ll just need to file IRS Tax Form 709, though you won’t be taxed until you hit your lifetime limit of $13.99 million. You can also make direct payments of medical expenses and tuition for others, tax-free.
This means that, for most Americans, gifting the proceeds of your home sale is unlikely to trigger any sort of tax—so it’ll be up to you to decide how much to share.
How to leverage your home without letting it go (for now)
Maybe you’re not quite ready to sell. Fortunately, there are other ways to make the most of your situation—options that may ease the emotional weight of leaving the home where you once marked your kids’ heights on the doorframe.
You can transfer ownership of your home by signing over the deed to your child (or children), but this move carries significant tax consequences. Your child would become responsible for capital gains tax based on your original purchase price. Additionally, if you require long-term care within Medicaid’s five-year lookback period, this transfer could be penalized—potentially delaying your eligibility for benefits until the home’s value has been spent down.
You could also turn the home into a rental, allowing you to generate income while leaving the door open to return home if needed. And, if you have lived in a home for two out of the last five years, you can still qualify for the capital gains exclusion once you decide to sell.
To that end, there is the possibility of using a 1031 tax exchange on your home turned rental, which allows you to sell the property and invest in another “like-kind” property (essentially, another rental) and pass that down to your children with a step-up in basis, erasing deferred taxes. But the rules around a 1031 are stringent and can’t be applied to a primary residence, which may make this workaround more trouble than it’s worth.
Why gift giving is also smart estate planning
Few things feel as reassuring as a sure bet—and holding onto your home until you pass away can be just that. By allowing your children to inherit the property, they receive a stepped-up basis, potentially avoiding capital gains taxes entirely. It’s a strategy that helps preserve your hard-earned equity, sidestep disputes over a few thousand dollars, and possibly prevent any family squabbling—since, after all, you won’t be around to referee.
However, there are some tax benefits to giving away your wealth while you’re still alive.
“If the estate is above the estate tax exemption, they may need to start giving money away to reduce the value of the estate,” says Amber Saunders, an attorney and principal at The Saunders Firm. “If that’s the case, start giving it away now: Use gift exemptions, charitable giving, and other tools to reduce the estate. Because that money’s going somewhere—better it goes to your family or causes you care about than to the IRS.”
Secondly, no one likes a messy inheritance.
“When we don’t plan, we end up making decisions in emergencies with fewer options,” says Saunders. “Planning ahead can make life smoother for your kids or beneficiaries. It helps them know what you wanted and makes things easier for them.”
A final consideration: the emotions—good and bad
A complicated family-home sale is something Saunders has personal experience with: A few years ago, her mother sold the Boston-area home that had been in the family’s possession since her great-grandmother bought it.
“When she sold that house—which had been in our family since the ’60s and was now worth about a million dollars—it allowed her to retire and pay medical bills after a cancer diagnosis. I was upset at first. I thought we should rent it out. But we didn’t have the money to renovate it,” she says. “In the end, selling it was the right decision.”
This experience shaped how Saunders thinks about inheritance and estate planning. And she has advice for those looking to avoid any of the drama that comes with these major life decisions.
“Talk it out beforehand,” she says. “Drama happens when expectations aren’t aligned and people are grieving. Conversations while everyone is alive and healthy make a huge difference.”