Homeowner Exemption With New Marital Status
Help me out here folks.....
Bought my house in 1997.
I married in Oct. 2003.
I have 500k equity now.
If I sell now, do we get 250k or 500k for an exemption. Does it matter that she lived with me for several years prior to the marriage?
Thanks in advance for the responses. Brian[ Edited by bnwbaron on Date 12/24/2004 ]
Go back to the drawing board first.
The equity is not important; it is the gains.
Selling price 700K
- costs to sell (50K)
- purchase price (200K)
- costs to purchase (10K)
- capital improvements (windows, addition) (40K)
= Gain for taxes 400K
So, you might be below 500K
Wife will not have to be on title as long as you file joint tax return in the year of home sold.
Looks like wife must OWN (by virtue of marriage) and occupy for 24 mo. , so she would not qualify until 10/05 for full 250K. I am wondering if she may be eligible for a partial exemption, depending on why you are selling.
Here's a URL that might also help...
http://www.wwlaw.com/taxact.htm
In part, it states that...
"A married couple filing a joint return can exclude $500,000 [even if only 1 spouse meets the 2 out of 5 year ownership requirement, as long as they both lived there 2 years]. "
HTH
http://www.wwlaw.com/97wkst.htm
And here is a worksheet to assist the computation of what your gains are.
It looks like wife would qualify under the USE test and does not have to qualify under the Ownership test.
You guys are awesome, thanks for the quick responses
Hey ceinvests,
Did you see the part that also said...
"This rule can be used every 2 years. There is no more lifetime "tainted spouse" rule."
Hmmm..."tained spouse." I wonder who came up with that term.
: )
Yes, that is funny now that I see it again.
It used to be that if a potential/new spouse had used their lifetime exemption with the previous spouse, they were tainted for lifetime. Now, they can only be tainted for up to 2 years, therefore making them far less of a liability...so not really tainted any more since the honeymoon stage should last long enough for estate planning stage. LOL :-D
The ownership requirement is simply that "either spouse meets the ownership requirement with respect to the sold residence". I still think that it makes no difference if wife is on the title or not, as long as husband has owned for at least 2 years. If the property was held by both for less than 2 years as TIC I might have some concerns but I'm guessing most people would hold as joint tenants.