NOVEMBER 2026 | REAL ESTATE & FAMILY WEALTH

Giving the Gift of a Home: What the New 2027 Tax Numbers Mean for Your Family

A message from the Gloria Shepard Team at Compass

This time of year, conversations turn to family. Children and grandchildren come home for the holidays, and one question that might come up is: How can we help them buy a home of their own?

In San Diego, where the median single-family home sits above $1 million, a down payment is the biggest hurdle for many young home buyers. Help from family has become a normal part of the path to owning a home. Last week, the IRS released its 2027 tax numbers, and they're worth knowing before you gift.

The New Numbers

On November 5, the IRS announced its annual inflation adjustments for 2027. Two figures matter most for families:

One timing opportunity: gifts made in December use the 2026 exclusion, and gifts made in January use the 2027 exclusion. A family planning to help with a spring purchase can give before December 31 and again after January 1, getting two years of annual exclusions within a few weeks.

Cash or the House Itself? The Difference Is Bigger Than It Looks

This is where we see families surprised most often. Giving cash toward a down payment is simple. Giving real estate, such as putting a child on the deed or transferring a home you've owned for decades, works very differently for tax purposes.

Gifted property keeps your original cost basis. If you bought your home for $600,000 and it's worth $3 million today, a child who receives it as a gift takes on your $600,000 basis. When they sell, they could owe capital gains tax on decades of appreciation.

Inherited property generally gets a step-up in basis. If the same home passes to your child at death, their basis usually resets to its value on that date, and much of that built-up gain can be wiped out. California is a community property state, so for married couples a full step-up can even apply when the first spouse passes.

Before adding a child to a title or deeding a home "to avoid probate," talk with your estate attorney. A trust often accomplishes the goal without giving up the step-up.

Don't Forget California Property Taxes

Proposition 19 changed how California handles property passing from parents to children. A child can keep a parent's lower assessed value only if the home was the parent's primary residence and becomes the child's primary residence within one year. Even then, the benefit is capped: the protection covers the parent's assessed value plus an inflation-adjusted amount, currently $1,044,586 for transfers through February 15, 2027. Anything above that is added to the child's taxable value. That figure is due to be adjusted for transfers starting February 16, 2027.

Rental properties, second homes, and vacation homes no longer qualify at all. For high-value homes in our communities, this means a family transfer often still brings a significant property tax increase. It's worth running the numbers before deciding whether to transfer, sell, or hold.

Helping a Child Buy: A Few Practical Steps

Document the gift. Lenders will ask for a signed gift letter confirming the money doesn't need to be paid back, along with a paper trail showing where the funds came from. Moving funds well before the loan application makes underwriting easier.

Consider timing. As noted above, splitting a gift across December and January can double the annual exclusion amount within a few weeks.

Think beyond cash. Some families lend money with a formal, documented family loan, or co-sign instead of gifting outright. Each option has different tax and lending implications.

Coordinate your advisors. Your CPA, estate attorney, and lender should all know the plan before money or a deed changes hands.

A Note From Our Team

We've helped many families through these moments: parents helping a child buy a first home, heirs deciding what to do with an inherited property, and longtime owners thinking about their legacy. We are real estate professionals not tax advisors, but we can help you understand what a home is worth, what it might sell for, and how the decision to hold, gift, or sell could play out in the market. We're always glad to connect you with trusted estate and tax professionals.

You can reach us any time at (619) 417-5564 or gloria@gshepardhomes.com.

Warmly,

The Gloria Shepard Team | Compass

About Gloria Shepard

With more than two decades of experience in Santaluz, Gloria Shepard brings deep community knowledge, established relationships, and a highly personalized approach to buying and selling luxury real estate throughout Santaluz, Black Mountain Ranch, and North County San Diego.

Gloria Silveyra-Shepard
(619) 417-5564
gloria@gshepardhomes.com

Cory Shepard
(619) 889-8498
cory@cshepardhomes.com

Sources & Data Notes

Tax figures from IRS Revenue Procedure 2026-35 (released November 5, 2026). Proposition 19 figures from the California State Board of Equalization.

This article is for informational purposes only and does not constitute tax, legal, or financial advice. Please consult a qualified tax advisor or estate attorney about your own situation.