THE HOUSE IS TOO BIG NOW · COMPLETE GUIDE 06
Downsizing from a Colorado house
Two houses. One order. Your numbers.
Get the gain, the property tax position, and the buy-or-sell order on paper before touching the house or the listing.Most of this job is not showing houses. It is the contract, the calendar, the negotiation, and staying steady while the money is decided.
WHAT THIS GUIDE DOES
Know what the sale leaves after tax, which order to buy and sell in, and which questions belong with your CPA and attorney before the list price is chosen.
- 01THE GAIN
What is the sale worth after tax?
Purchase price, improvements, and the federal exclusion on a principal residence decide how much of the gain is yours to keep. The CPA confirms it; the net sheet prices the sale beside it.
- 02THE ORDER
Buy first or sell first?
One order costs carrying two homes; the other costs a move in between. Price both on your own numbers before you commit to either.
- 03THE HOUSE
What does a long-held house need?
Decades of ownership means deferred items, old permits, and a lot of contents. Price the preparation against the list price, and stop where the return stops.
- 04THE CLOSE
Who signs, and where does the money land?
Title, trust, or estate planning changes made years ago decide who signs. Confirm it with title early, with the deferral or lien payoffs on the settlement statement.
The tax questions that belong before the list price.
A house held for decades usually carries a gain, and the first question is how much of it is yours to keep. Federal law excludes up to $250,000 of gain on the sale of a principal residence (VERIFIED, 26 U.S.C. 121(a)) when you owned and used the home as your main residence for periods adding up to 2 years or more in the 5 years ending on the sale date and have not used the exclusion on another sale in the prior 2 years; the $500,000 figure on a joint return needs either spouse to meet the ownership test, both spouses to meet the 2-year use test, and neither to have used the exclusion in the prior 2 years (VERIFIED, 26 U.S.C. 121(b)(2)). The gain is the amount realized (the sale price less selling costs) minus the adjusted basis (what you paid, plus capital improvements, less any depreciation taken), so the closing statement from the purchase and every improvement receipt are worth finding before anything else. Gain above the exclusion is your CPA's question, and the answer can change the list price, the timing, and whether a spouse's name on title matters.
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The second question is the property tax position on both houses. Colorado's senior exemption takes 50 percent of the first $200,000 of actual value off the roll for an owner 65 or older who has owned and occupied the home for 10 consecutive years, and it ends when the property sells (VERIFIED, Boulder County Assessor, C.R.S. 39-3-203). For tax years beginning January 1, 2025, an owner who qualified in 2020 or later may qualify for a qualified-senior primary residence classification on the next home, valued on a reduced basis (VERIFIED, SB24-111, Colorado General Assembly). If the taxes on the current house have been deferred under the state program, that loan, with its interest, is due when the home sells or transfers (VERIFIED, Colorado Property Tax Deferral Program, C.R.S. 39-3.5), so it belongs on the net sheet as a payoff.
Two houses, one order.
The choice most owners lose sleep over is whether to buy the smaller place first or sell the house first. Buy first and you carry two homes for a season, with the payment on the new one running while the old one is shown. Sell first and you move twice, or negotiate a rent-back, and you shop with a sale already closed and the equity in the bank. The Denver metro median listing left the market in 57 days in August 2026 (VERIFIED, Realtor.com via FRED), and that figure runs to contract, not to closing; a financed buyer then needs roughly 30 to 45 more days to close. Read the total both ways: it is the carrying window to budget for if you buy first, and the lead time you have to find the next place if you sell first. Neither order is right for everyone, which is why both are priced on your own equity, payment, and timeline at /tools/move-up before a contract is written.
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If the next place is a 55+ community, the rules are federal and local at once. A community qualifies as housing for older persons when at least 80 percent of its occupied units are occupied by at least one person 55 or older, it publishes and follows policies showing that intent, and it verifies occupants' ages under HUD's rules (VERIFIED, 42 U.S.C. 3607(b)(2)(C); 24 C.F.R. 100.307). That leaves the community room to write its own rules about a younger spouse, a live-in caregiver, an adult child who needs a room for a year, or how long a guest may stay. Those rules, the HOA budget, and any pending assessment are read before the offer, not after. If you are weighing keeping the old house as a rental instead of selling it, the two paths are priced side by side at /tools/rent-vs-sell.
Forty years of contents, and who signs.
A long-held house needs a different preparation plan than a house sold every seven years. Deferred items, an old roof, a furnace past its expected life, a finished basement whose permit nobody can find, and a garage full of contents each get a decision: fix, disclose, or price. The preparation is priced against the list price at /tools/listing-prep, and the rule is to stop where the return stops. The contents are the part nobody budgets time for. Start there, weeks before photos, with the family, an estate sale company, or a hauler, because the house cannot be shown around forty years of things and the clearing takes longer than anyone expects.
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Who signs is settled at the start. A house bought decades ago may sit in a trust, carry a deceased spouse's name, or have been retitled during estate planning, and each of those changes who signs the contract and the deed. Title confirms it before the listing agreement, and a Colorado attorney answers anything about the trust or the estate. Since 2026-08-12 a Colorado broker needs a signed written agreement stating compensation before licensed work (HB26-1426, bill and date VERIFIED, amended text PROBABLE), and without a written single-agency agreement the broker is a transaction-broker by default (VERIFIED, C.R.S. 12-10-403(2)). Send the address, who is on title, and the year you bought, and the first thing back is a net sheet for the sale and both orders priced, with the tax questions listed for your CPA beside it.
THE ACTUAL HANDOUT
DOWNSIZING · original field guide
The real first page is visible below. Open the complete handout or original PDF for every page.DOWNSIZING · ASKED FIRST
The questions that come before price.
- Do I owe capital gains tax when I downsize in Colorado?
- Often less than owners fear. Federal law excludes up to $250,000 of gain on a principal residence if you owned and lived in the home for at least 2 of the 5 years before the sale; a joint return can exclude $500,000 only if either spouse meets the ownership test, both spouses meet the 2-year use test, and neither used the exclusion in the prior 2 years. The gain is the sale price less selling costs, minus your adjusted basis (purchase price plus capital improvements, less any depreciation), so find the purchase closing statement and the improvement receipts. Your CPA confirms the number before the list price is set.
- Do I lose my senior property tax exemption when I sell?
- The exemption on the current house ends at closing. Since tax year 2025, an owner who qualified for it in 2020 or later may qualify for a reduced valuation on the next primary residence under a separate classification, so ask the assessor in the new county with your old exemption record in hand. If your taxes were deferred under the state program, that balance is paid at closing.
- Should I buy the smaller place first or sell the house first?
- Buying first means carrying two homes for a season and shopping without a sale contingency. Selling first means moving twice or arranging a rent-back, with the equity settled before you shop. The Denver metro median listing took 57 days to reach contract in August 2026, plus roughly 30 to 45 days to close on a financed sale, which is the window you budget for either way. Both orders are priced on your own numbers at /tools/move-up.
- What does Robert do, and what goes to the CPA or attorney?
- Robert prices the sale, the preparation, and the order of the two transactions, as a licensed Colorado broker under a written agreement. Your CPA confirms the gain, the exclusion, and the property tax consequences. A Colorado attorney answers questions about a trust, an estate, or who signs. Your lender sets the loan on the next home. There is no fee to talk.
WHERE ROBERT STOPS
Robert prices the sale, the order of the two transactions, and the preparation, as a licensed Colorado broker. The gain, the exclusion, and the property tax consequences are confirmed by your CPA; title, trust, and estate questions by a Colorado attorney; the loan on the next home by your lender.
THE RECORD, PUBLICLY CHECKABLE