Sale of Your Primary Residence During Divorce: What are the Tax Implications
Divorce is a complicated process that has tax implications. When you decide to file a divorce, you and your spouse will have to resolve issues including how your marital assets must be split. And since your marital house is perhaps your greatest asset, selling it might be an issue you want to tackle during your divorce. Because of this, you must understand the tax basics while you move forward. An experienced divorce lawyer will guide you through every step of the process to help you reduce any capital gain taxes when you sell your family house. Click here for more information.
What Happens to Your House During Divorce?
Each divorce has unique complications. Once you have tackled child custody, you may need to focus on asset division. Although your family house may not be the most important asset you own, you may be too attached to it and want to stay there, particularly if you have kids at home. You need to consider many things. Your and your spouse may agree to let the custodial parent keep the home until your children have completed high school. A divorce attorney will guide you as you explore your options and help you get the resolution that works for you and your kids.
Understanding Capital Gain Tax
When you decide to sell your family home during divorce, you may get a $250, 000 tax exclusion on the capital gains you get from the sale. Filing jointly may let you exclude up to $500, 000 in capital gains. This can get complicated during divorce and you must consider a lot of details. Generally, tax rules let you exclude any profits you may make when you sell your main house from being taxed as income. But, this is only possible if you meet two conditions. First, you and your spouse must have stayed in this house for a minimum of two of the last five years. Second, the profits you get from the home’s sale should not be over $500, 000.
Should You Sell Your Family House?
If neither of you will keep the family house after your divorce has been completed, it is best to sell it sooner in the divorce process. A financially complicated divorce could make it impossible for you to collect on the tax exclusion of $500, 000. Make sure to consult a reputable lawyer to make sure you make the most of your tax exclusions.