Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

Home Sale With New Spouse

Posted by taxguru on August 12, 2012


Q:

Hello Tax Guru,

Three years ago I re-married, after having been a widow for 7 years. Title of the house was at my husbands death transferred to my name only.

My new husband also owns a home, and I wishes to sell mine, what steps are necessary to obtain a full marital tax deduction of $250,000.00 x two. Add my new husbands name to the deed of course is the obvious, but will we then have to wait to sell the house in order to qualify?

Yes, we have lived in the house for two of the past 5 years.

Thank you very much for your assistance.

A:

It appears that you already qualify for up to $500,000 of tax free gain from the sale of your residence, per this section from IRS Pub 523, which you can see at:
http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200739

Special rules for joint returns.   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.

Either you or your spouse meets the ownership test.

Both you and your spouse meet the use test.

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.

If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property.

Good luck.  I hope this helps.

Kerry Kerstetter


Follow-Up:

Hello Mr. Kerstetter, 

We appreciate your reply and good information. 

Thank you very much.

 

You can study or you can QuickStudy!

 

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