Taxes On The Sale Of A Home
I purchased a home 3 years ago and plan to sell early next year at an estimated gain of 230k.
I understand that I meet the reqirements for a 250k exemption.
My question is,does my wife?
We married january of this year and I put her name on the deedas a gift(proof of love). Can I take her name off of the deed and claim the exemption solely?
Can we keep her on the deed and take my exemption of 250k if we file taxes jointly?
Just do not want to give away money,nor fail to follow the IRS law,owing much later.
Any knowledge on this matter would be Most appreciated.
thank you
You only have a gain of $230,000, that is less than the allowed $250,000. What is the problem? You can take this exemption for every home you live in for 2 of the last 5 years. I call it the rule of 2. I move every 2 years and take the gain free and clear. Sometimes I sell other times I rent it out and then sell it within the next 3 years.
The question is has your wife sold a home in the last 2 years?
This reply is for Jane Sherman. thank you replying to my post. The problem may be the IRS. My wife has not lived in the house for 2 years and I was told that as half owner that she would be liable for her half of the taxes. We are just trying to insure that we do not have to pay taxes if it is legal.
Thank you again.
This reply is for Jane Sherman. thank you replying to my post. The problem may be the IRS. My wife has not lived in the house for 2 years and I was told that as half owner that she would be liable for her half of the taxes. We are just trying to insure that we do not have to pay taxes if it is legal.
Thank you again.
No Karen she did not sell a house in the last two years.
Jane is correct. If your gain is less than $250k, you can use your exclusion and would not need hers. If she has not lived in the house for 2 years, she would not qualify for an exclusion.
Per Bob Bruss Mailbag WashingtonPost Oct 16,04: "DEAR BOB: I bought my condo in 2002 when I was single. I recently became engaged. The condo has appreciated in market value by about $200,000. After we marry, will our tax-exempt amount remain at $250,000 or will we then qualify for the $500,000?"
-- Daniel M.
DEAR DANIEL: If the condo is the principal residence of you and your new wife, after you each have occupied it as your principal residence at least two of the five years before its sale, you won't have to pay taxes on up to $500,000 in home-sale profits. This exemption is provided by Internal Revenue Code 121.
You need not add your wife's name to the title because the law requires only that title be held in one spouse's name if they file a joint income tax return in the year of home sale. Consult a tax adviser for details.
Readers with questions should write Robert J. Bruss at 251 Park Road, Burlingame, Calif. 94010, or contact him via his Web page, www.bobbruss.com.
What Bob doesn't mention is that the exclusion does remain at 250,000 until the wife lives in the house for 2 years (then it increases to 500,000) assuming that Daniel has already lived there a full two years.
Hi...
Have you looked into 1031 Exchange yet? This is the best way to protect your money... I am just gussing you are going to invest most of it into property... If that is the case you have 30 days from the closing date of the profiting property to identify the property you are going to buy. You get to give a list of 10 properties. You have another 90 days to close the deal on equal or higher value of the 1031 amount.
Also, something else to consider is that if you are going to pay off cars, credit cards, Home Depot Bill, Contractors, or debt.... it can be paid out of escrow. By paying for these items out of escrow you are not taking posession of the funds... That is the key... The minute you take the check ... You get stuck with the tax...
Don't forget that you can also shelter it with your retirement account. Again the key is get it all lined up before closing so you don't get the check. No check ... no taxes... Check ... Pay Taxes...
Quote:
On 2004-11-01 17:49, redsebring wrote:
I purchased a home 3 years ago and plan to sell early next year at an estimated gain of 230k.
I understand that I meet the reqirements for a 250k exemption.
My question is,does my wife?
We married january of this year and I put her name on the deedas a gift(proof of love). Can I take her name off of the deed and claim the exemption solely?
Can we keep her on the deed and take my exemption of 250k if we file taxes jointly?
Just do not want to give away money,nor fail to follow the IRS law,owing much later.
Any knowledge on this matter would be Most appreciated.
thank you
Thank you ALL for your replies!
Perhaps,this information given by an IRS operator may be of further grist for this mill. I was told,by said IRS operator,that since my wife is on the deed,she is half owner.
Thusly,she is liable for half of any profits. And since she is NOT eligible for the exemption....she would be liable for taxes on her half of the sale.So,I can only use my exemption for my half.
The IRS operator thought if I take her off the deed that this point would be moot.
But I do not want to be hit for tax fraud,lol!
I was transferred to another IRS operator and told taking her off was legal..."but to consult a CPA or tax attorney." He sounded most ominus and would not confirm this action without his aformentioned quote. What would you all do? Sounds like taking her name off the list is legal and save us from the tax hit.
Thanking you all in advance,
Dan
Newkid - I can't find anything real specific to the situation under the current exclusion law as to the wife being on the deed but under the previous home sale exclusion law there is some indication that if the home was held as joint tenants the sale was treated as a single sale and the proceeds weren't split. So, if one spouse qualified they could use the exclusion for the entire sale. If the house was held as tenants in common the proceeds would be split and the wife would not be able to exclude her part of the gain.
Red - If the amount is significant in this case it may be wise to have a tax attorney do some research. Also, the last place I would rely on for tax advice is the IRS.