Should I sell my Colorado Springs home, gift it to my children, or leave it to them?

It depends on what you need from the home during your lifetime, but for a longtime home, gifting it now is often the most expensive choice for your children. A gifted home keeps your original tax basis, so a later sale can bring a large capital gains bill. A home left at death generally gets a new basis at its value on the date of death. Selling it yourself lets you use the home sale exclusion. Gifting can also affect Medicaid eligibility and your senior property tax exemption. It's worth talking with a CPA and estate attorney first.

Watch the video: The $75,000 Medicare Mistake When Downsizing After 60 on Life & Real Estate Without Regret.

Three choices, compared

None of these is right for every family. What matters is the order in which you decide.

Why the tax basis matters most

Your tax basis is roughly what you paid for the home plus the cost of improvements. When a home sells, the gain is the sale price minus the basis.

Hypothetical example, for illustration only: parents bought their Colorado Springs home decades ago for $150,000 and it's now worth $550,000.

• If they gift it and a child later sells it for $550,000, the child's basis is generally the parents' $150,000. That leaves about $400,000 of gain. Unless the child lived in the home long enough to use their own exclusion, much of that gain may be taxable.
• If they leave it at death and the child sells soon after for about the same value, the basis is generally reset to about $550,000, so there's little or no gain.
• If they sell it themselves as a married couple, they can generally exclude up to $500,000 of gain, so the sale may produce no tax, and they can pass on cash instead.

That's why, in my video, I talk about families who decide not to sell at all and let their kids get the step-up in basis when they pass. The step-up comes with inheritance, not with a gift. Your CPA can run your actual numbers, including improvements, depreciation if the home was ever rented, and your children's own situations. See capital gains on a longtime home.

What else changes when you gift a home

Gifting a house during your lifetime can make sense in some plans, but it comes with trade-offs families don't always expect:

• You give up control. Once the deed is recorded, the home belongs to your children. It can be exposed to their creditors, a divorce, or a disagreement among siblings, and you can't take it back.
• A gift tax return may be required. For 2026, a gift of more than $19,000 to one person in a year generally requires a federal gift tax return (Form 709). Actual gift tax is rare, because the lifetime exemption for 2026 is $15 million per person. Colorado has no state gift or inheritance tax.
• Medicaid can look back five years. If long-term care could be needed, Health First Colorado (Colorado's Medicaid program) reviews transfers made for less than fair value during the five years before applying. A gift of the home can delay eligibility. Federal law exempts some home transfers, such as to a spouse, to a child who is blind or disabled, or to a child who lived in the home and provided care for at least two years. An elder law attorney can say what applies.
• Your property tax picture can change. In El Paso County, Colorado's senior exemption requires the qualifying senior to own and occupy the home. Deeding the home to your children can end it, even if you keep living there. Ask the El Paso County Assessor before recording anything. See how the senior exemption works.
• Your mortgage and insurance need a look. If there's still a loan, talk with your lender. Your homeowners insurance also needs to reflect who owns the house and who lives there.

Ways to leave the home at death

If leaving the home is the plan, the tool you choose decides whether the house goes through probate:

• A will. The home passes through probate in El Paso County District Court. See whether you have to go through probate to sell a parent's house.
• A beneficiary deed. Recorded with the El Paso County Clerk and Recorder while you're alive, it passes the home at death without probate. See what a Colorado beneficiary deed is.
• A living trust. A successor trustee can sell or distribute the home without probate, and can also step in if you can no longer manage your affairs. See selling a house held in a living trust.

When selling during your lifetime makes more sense

Selling it yourself is often the better fit when:

• You need the equity for the next chapter: a smaller home, senior living, or care. See whether to sell before moving into senior living.
• Your gain fits within the home sale exclusion, so selling costs little or nothing in tax.
• None of your children wants to own or manage the house, or several siblings would have to agree on it later.
• The home needs work you'd rather not leave to your children.

Middle paths: get the structure right first

There are options between an outright gift and waiting. In my video, I describe a family helping their daughter into a starter home. The plan was to buy it in her name and have her pay them back over time. Their CPA suggested a different structure: the parents stayed on title at first, the daughter paid fair market rent, and ownership moved to her over five years through planned gifts. It wasn't about dodging taxes. It used rules the IRS already allows, and the family saved about $52,500 in taxes because the CPA's advice came before the real estate transaction.

Your attorney may also raise options like a qualified personal residence trust, or selling the home to a child. Each has its own tax and legal rules, so they're questions for the attorney and CPA, not decisions to make at the kitchen table.

How I help families think it through

I work in a specific order: life first, then wealth, then real estate. What do you need from this home for the rest of your life? Then I recommend sitting down with your CPA and estate attorney, in the same room if possible, to model the options before anyone calls a realtor. Once the plan is clear, the real estate side can be built to fit it. Sometimes the answer is to sell now. Sometimes it's not yet, or not at all, and that's a good outcome if it's the right one for you.

What could change the answer

• Long-term care is likely. Medicaid's five-year look-back and estate recovery can reverse the math, so an elder law attorney belongs in the conversation first.
• A child already lives in the home, or plans to. Their own residence history can change the tax picture on a later sale.
• You need the equity to live on. Selling, or keeping the home and borrowing against it, may matter more than what's left for the next generation.
• Your estate is large enough for estate tax. Above the federal exemption, the planning changes, and specialized advice is essential.
• Your children disagree, or one is in a divorce or has debts. Direct ownership by a child may put the home at risk.

When to talk with a professional

A CPA can model the tax outcome of selling, gifting, and leaving the home using your real numbers, including capital gains, gift tax filings, and the effect on Medicare premiums from a large gain. An estate planning attorney can prepare the deed, trust, or will that matches your decision. An elder law attorney belongs in the conversation whenever long-term care or Medicaid is possible. See how to choose a probate, estate planning, or elder law attorney in Colorado Springs. The El Paso County Assessor can confirm how a change in ownership would affect your senior exemption.

I'm a REALTOR®, not an attorney or CPA. This page is general information, not legal or tax advice.

Sources

• Weldon Hobbs, Life & Real Estate Without Regret: The $75,000 Medicare Mistake When Downsizing After 60
• IRS: Publication 551, Basis of Assets (gifted and inherited property) and Publication 523, Selling Your Home
• IRS: Instructions for Form 709, gift tax; 2026 annual exclusion and basic exclusion amounts as summarized by Morgan Lewis
• Colorado Gerontological Society: Transfers Without Fair Consideration (Medicaid look-back)
• 42 U.S.C. § 1396p(c) (Medicaid transfers of assets, including exempt home transfers)
• Colorado Department of Health Care Policy and Financing: Health First Colorado Recoveries
• El Paso County Assessor: assessor.elpasoco.com