Today TaxMama hears from Marti in Los Angeles, who tells us. “I am getting married in September. I own a condo that has been my primary residence for five years. My fiance’ and I lived there together for two, but he is not on title.
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I have over $250,000 in equity so I would have to pay capital gains tax on the extra amount if I sell the home. To get the $500,000 capital gains exclusion does he have to be on title? Or do we have to be married for a length of time, etc. I’m trying to see if we are better off selling it after we get married to get the capital gains exclusion or if some rule prevents us from that since we didn’t own it together.
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Hi Marti,
Well, congratulations on your upcoming marriage! How wonderful.
And you’re in L.A., so, it’s reasonable that your home appreciated more than $250K in the last 5 years.
OK, as far as straight tax rules regarding the homeowner’s exclusion – here’s the scoop.
If you lived in it for 5 years – you’re entitled to $250,000 tax-free. Now, your fiance meets one of the two tests – he lived in the house for two years.
Now, all he needs to do is to qualify for the ownership test. And once you’re married, he’ll qualify.
Interestingly enough, even though IRS eliminated the form to report the sale of your home, they have a substantial publication that explains the tax issues – IRS Publication 523. https://www.irs.gov/publications/p523/index.html
As IRS explains when they talk about the Maximum Exclusion Rules:
https://www.irs.gov/publications/p523/ar02.html#d0e1931
You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true.
·You are married and file a joint return for the year. – you can do that!
·Either you or your spouse meets the ownership test. – you qualify
·Both you and your spouse meet the use test. – you both qualify!
·During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. – does he qualify?
That’s it in a nutshell! Marry first. Sell later. File jointly. Save $500,000!
Remember, you’ll find answers to questions about capital gains and all kinds of tax issues, free. Where? Where else? At TaxMama.com
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- Ask TaxMama :: Where taxes are fun and answers are free
- IRS Publication 523 :: Sale of a Home
- IRS Publication 523 :: Maximum Exclusion Rules
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