The spousal buyout, in numbers

Last updated October 6, 2026

By Cade Cashman, Principal Agent, Ascension Estates at Equity Union Real Estate. DRE #02222044.

To keep the house, the spouse who stays pays the spouse who leaves half of the equity, and usually refinances the loan into their own name. Equity is the agreed value of the house less the loan. So two numbers decide it: the equalizing payment, and a new loan the staying spouse can qualify for alone. Work out both before anyone promises the kids they will keep their rooms.

This page walks the arithmetic with made-up numbers, then the refinance, the deed and the taxes. Every rule below is general information from California and federal law. Your family law attorney decides how it applies to your case.

How is a spousal buyout calculated?

Start with the equity, then split it. In a California divorce the court divides the community estate equally, unless the spouses agree otherwise in writing or in court (Family Code section 2550). If the house is all community property, each spouse owns half of its equity.

Illustrative arithmetic, with numbers chosen to be easy to follow:

Those figures are illustrative arithmetic. They are not an estimate of any house.

Three things move the payment, and each one is a negotiation for your attorneys. Money one spouse put in from before the marriage or from an inheritance can change the split. Some couples take the cost of a future sale off the value first, because the spouse who stays would pay it one day and the spouse who leaves is spared it. And the house does not have to be paid for in cash. Because the law divides the whole community estate equally, the spouse who keeps the house can give up an equal value in other assets instead, such as a share of a retirement account.

How do you agree on the value?

Use a number both of you can check. A licensed appraiser, chosen together, is the usual answer. Closed sales near the house in the last few months are the evidence any appraiser will use, and both of you can look them up. A list price in a neighbor's yard is a hope. A sold price is a fact.

Agree on the date of the value in writing. In a moving market, a value from last spring and a value from this fall can be far apart, and the payment moves with it. Our guide to checking whether a price is right shows how to read closed sales.

Can the staying spouse qualify for the new loan alone?

This is where most buyouts are won or lost. The usual way to pay the equalizing payment is a cash-out refinance in the staying spouse's name only. The new loan pays off the old loan and funds the payment.

Continue the illustrative arithmetic. The old payoff is $600,000 and the payment is $400,000, so the new loan is about $1,000,000 before closing costs. On a $1,400,000 value that is a loan of about 71% of the value. Lenders set their own limit on how much of the value a cash-out loan can be, and they qualify you on your income alone.

Get the real numbers from a lender before you sign anything:

• The most the lender will lend on a cash-out refinance of this house.
• The monthly payment on that loan at today's rate, with property tax and insurance added.
• Which income counts, and whether support you receive or pay is counted.
• The closing costs, so the new loan covers them as well.

Then put the new monthly payment next to the income the staying spouse will have after the divorce. If it does not fit, it is better to learn that now than after the judgment is signed.

Why does the leaving spouse need off the loan as well as off the deed?

The deed and the loan are two separate papers. The deed says who owns the house. The promissory note says who owes the money. A deed signed over to the staying spouse changes the first paper and leaves the second one alone. The lender can still look to both people who signed the note until the loan is paid off or the lender releases one of them in writing.

That matters to the spouse who leaves. A loan still in their name counts against them when they apply to buy their next home, and a missed payment by the other spouse lands on their credit too. The refinance fixes both, because it pays the old loan off. So the buyout and the refinance should close together, and your attorneys can make the deed transfer part of the same escrow.

Does a buyout trigger a property tax reassessment or a tax bill?

For property tax, generally no. California treats a transfer to a spouse or former spouse in connection with a property settlement agreement or a divorce decree as no change in ownership, so the house keeps its assessed value (Revenue and Taxation Code section 63). The county's documentary transfer tax also does not apply to a deed dividing community property under a divorce judgment or a written agreement made for one, as long as the deed carries a signed statement claiming the exemption (Revenue and Taxation Code section 11927).

For federal income tax, a transfer of property to a spouse, or to a former spouse when it is incident to the divorce, generally produces no gain or loss, even when it is made in exchange for cash. The spouse who receives the house takes over the other spouse's basis. Source: IRS Publication 504, Divorced or Separated Individuals.

That carryover basis is the part to plan for. When the staying spouse sells years later, the gain is measured from the original purchase price plus improvements. A single seller can exclude up to $250,000 of gain on a main home they owned and lived in for 2 of the 5 years before the sale, under the rules in IRS Publication 523. On a house bought decades ago, the gain can run past that. Have your CPA run the number before you agree to the value, because a house and an equal amount of cash do not carry the same future tax.

What if the staying spouse cannot qualify?

Then the buyout as planned will not close, and the choice is among a few paths. Each one is for your attorney to set up.

The buyout worksheet

Fill in the blanks with your own numbers and send the page to both attorneys.

1. Agreed value of the house: $______, as of ______ (date), from ______ (appraiser or closed sales).
2. Loan payoff, from the lender's payoff statement: $______.
3. Equity, line 1 less line 2: $______.
4. Adjustments your attorneys agree on, such as separate money put in or sale costs: $______.
5. Equalizing payment: half of line 3, after line 4: $______.
6. Other assets traded instead of cash: $______.
7. Cash the refinance has to raise, line 5 less line 6: $______.
8. New loan, line 2 plus line 7 plus closing costs: $______.
9. Lender's cash-out limit on this house: $______. Line 8 has to fit under it.
10. New monthly payment with tax and insurance: $______. Next to it, the staying spouse's monthly income after the divorce: $______.

We cannot tell you how to divide your property. We can tell you what the house is worth today from real sales near it, in one report sent to both of you at the same time. The Free Equity & Exit Report is the place to start.

This is general information about California and federal law as it read on October 6, 2026. It is not legal or tax advice. How your property is divided, what counts as separate property, and how the deed and the refinance are written are decisions for a California family law attorney, and the tax result is for your CPA. Ascension Estates and its agents are not attorneys and do not practice law. Talk to your attorney and CPA before you sign anything.