Q:

Subject: We have two homes and...

we want to get married.  His home has 400,000 equity and mine has 500,000.  We were going to sell mine that will hit two years in March.  If we got married in January and sold in March...could he qualify with me as this being our primary res.? And we would move into his. OR does he have to live here with me to qualify?

A:

You will only qualify for a $250,000 exclusion.  Your example sounds just like the following from the IRS website:
 

Example 1 ­ one spouse sells a home.

Emily sells her home in June 2004. She marries Jamie later in the year. She meets the ownership and use tests, but Jamie does not. Emily can exclude up to $250,000 of gain on a separate or joint return for 2004.


Basically, the only way to increase that exclusion above $250,000 would be to add your fiance's name to the title and have him occupy it as his primary residence.  It's worth $342.47 of tax free gain for each day that he meets the ownership and use test.

What you really need to do is make a thorough and complete calculation of the cost basis of your home so that you can keep your gain to the lowest amount possible.  The amount of equity you may have in the home is a completely different number than your cost basis or your potential profit.  If you haven't been keeping track of how much you have invested in the home, you need to get started reconstructing that ASAP.  Be sure to include the costs of any appliances, furnishings and fixtures that you will be including  as part of your home sale.

And most important, work with a tax pro who understands how to minimize the taxation of home sales. 

Good luck.

Kerry Kerstetter

 

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 8/07/2005 01:28:00 PM Send this post: