Are you and your spouse homeowners in California? The name on your deed might seem like a small detail, but it could have massive tax implications. For married couples in California, the difference between two simple acronyms—JTWROS and CPWROS—could cost your family a fortune in taxes.

Many couples title their homes as “Joint Tenancy with Right of Survivorship” (JTWROS) to avoid probate. It’s a great feature, but it’s not the most tax-efficient choice.

Here’s the critical difference:

JTWROS (Joint Tenancy): When the first spouse dies, only their half of the home gets a “step-up” in basis to the current market value. The surviving spouse’s half retains the original, often low, purchase price. This can lead to a huge capital gains tax bill if they sell later.

CPWROS (Community Property with Right of Survivorship): This is the tax-savvy choice. Upon the death of the first spouse, the entire house receives a “double step-up” in basis. All capital gains are wiped away, leaving the surviving spouse with a much higher cost basis and potentially zero capital gains tax when they eventually sell.

Why use JTWROS then? Often, it’s simply a matter of legacy or lack of awareness. Since CPWROS was only introduced in California in 2001, many older deeds still reflect JTWROS.

If you own a home in California with your spouse, it’s worth reviewing your deed and considering if CPWROS or a revocable living trust is a better fit for your long-term financial plan.

This post is for informational purposes only and is not intended as legal or tax advice. Please consult with a qualified professional to discuss your specific situation. The specific federal tax code provision that provides for the “double step-up in basis” for community property is Internal Revenue Code (IRC) Section 1014(b)(6).