Keeping the House in a Divorce? The Capital Gains Trap No One Warns You About

The capital gains exclusion on a main home is $500,000 for a married couple and $250,000 for one person. Nobody adjusts it for inflation and nobody mentions it during a divorce. If you have been in the house twenty-five years, that gap is the difference between walking away clean and writing a check you did not budget for. FREE CHECKLIST — The Divorce and the House Tax Checklist https://tiffanilindstrom.com/guides/d... What's covered: The exclusion, and what happens to it. Up to $500,000 of gain is excluded when a married couple sells their main home. On your own it is $250,000. Both figures are fixed in the tax code and have not moved since 1997. Why your filing status on 31 December can be worth six figures. Selling in a year you can still file jointly may preserve the larger exclusion. Selling the following year may not. What "no tax when it transfers" actually means. Moving the house between spouses in a divorce is not taxed at the time, but the basis travels with it. The gain that built up over the marriage becomes entirely yours. Deferred gain from homes you sold decades ago. If you sold a house before 1997, the profit was likely rolled into the next one rather than taxed. It is still in there, and it reduces your basis. Why a buy-out priced on equity is not the same as a buy-out priced on what you keep. A dollar of home equity and a dollar in a pre-tax retirement account are not interchangeable and should not be traded at par. The provision that protects your exclusion if you move out and he stays. It generally has to be written into the divorce agreement, so it is a drafting question rather than an afterthought. WORK WITH ME The Life-Change Tax Strategy Session is a paid session for women sorting out their finances after a death, a divorce, or a move into retirement. You leave with a plan, whether or not you ever work with me again. https://tiffanilindstrom.com/work-wit... ABOUT Tiffani Lindstrom, CPA works with women navigating the three biggest financial turning points of their lives — divorce, widowhood, and retirement. New episode every week. https://tiffanilindstrom.com tiffani@lindstrom.cpa This is educational information, not tax advice. Every tax situation turns on its own facts. Nothing here creates a client relationship, and nothing here should be acted on without advice from a professional who knows your circumstances. #DivorceAndTaxes #CapitalGains #WomenOver50