Capital Gains & Death
Joint Tenancy’s Hidden Tax Trap
Imagine this scenario first: Mom adds her daughter as a joint tenant to dodge probate—sounds clever, right? Saves time, saves money, and keeps everything away from those lawyers, right?
But here’s the catch: only Mom’s half of the house gets a fresh tax basis when she passes. Daughter’s half stays tied to the original $40,000 purchase price from the ’70s.
House value today: $450,000
Mom’s half steps up: $225,000
Daughter’s half basis: $20,000
Total basis at sale: $245,000
Taxable gain: $450,000 – $245,000 = $205,000
If we assume around a 20% combined tax rate (15% federal + 5% Oklahoma), that’s roughly $41,000 swallowed by capital gains taxes—money your family could’ve kept.
Why Inheritance Rules Win Every Time
When property passes as an inheritance—through a Will, a Transfer-On-Death Deed, or a Revocable Trust—the IRS grants a full step-up in basis to the date-of-death market value. In our example, that means the home’s basis jumps straight from $40,000 to $450,000.
Sell immediately? $450,000 sale minus $450,000 basis = $0 gain, $0 tax.
No tricky math, no giant tax bill—just clean title and a fresh basis.
How to Make It Happen in Oklahoma
Will (Probate): Leave the home to your heir in your Will. After probate, they get a full step-up.
TOD Deed: Name your beneficiary now; after you die, they record acceptance—no probate, full basis step-up.
Living Trust: Fund it today; at your passing, your successor trustee distributes the home free of probate and with a fresh basis.
Bottom Line: Adding an heir as a joint tenant may feel easy, but it can trigger a hefty $40K+ tax hit. Passing your home via inheritance tools? That step-up wipes out capital gains, putting every dollar back in your family’s pocket.