Q: I read the information you provided regarding capital gains on the sale of a home.
It said “…When you sell your primary residence, you can make up to $250,000 in profit if you’re a single owner, twice that if you’re married, and not owe any capital gains taxes…”
My ex-wife and I were married when we purchased our home 18 years ago. We divorced one year ago. I live in the home, but we both still own it. We are planning to sell the property. How does the tax law regard this situation? Can we still receive the $250,000 per person exemption?
A: Well, you live in the property, so you would get the $250,000 exemption. If she lived there for two of the past five years as her primary residence, then she would be entitled to take the exemption as well. Since you are divorced and file separately, you would each take whatever you could from your taxes up to $250,000 each.
However, nothing is that clear cut when it comes to the IRS. There are a number of issues that go into determining whether you and your ex-wife would be entitled to the exemption.
It would seem that you should be able to get the $250,000 exclusion. But if you are expecting to file your own tax return and get a bigger benefit, you won’t. If you file separately – and I assume you now file separately as you are divorced – you would be limited to the deduction for a single individual.
Please consult your tax advisor for more details.