As part of your divorce settlement, you and your soon-to-be-ex must decide what to do with the marital home. No matter if you both decide to sell, one person buys out the other or you remain in the house for your shared children, you must understand how taxes work.
HouseLogic.com gives the rundown on a few marital home tax situations for divorcing couples. Learn how selling or staying in the marital home affects your current and future finances.
Say you or your current spouse remain in the marital home until your shared children move out. To save money on taxes, you may agree that one of you uses the house under a separation or divorce instrument. That way, the spouse who moves out may still list the marital home as a primary residence under tax rules as long as the other spouse stays in the property. When you sell the house, each spouse avoids taxes on as much as $250,000 of the profits. Otherwise, the person who moves out may face a massive tax bill upon selling the property years later.
You and your current spouse may agree to sell and move out of your jointly owned house now. If so, each spouse may exclude as much as $250,000 of profits filing as single taxpayers and $500,000 filing jointly. Those who have yet to live in the marital home for two years could qualify for a reduced exclusion.
Selling a share
If one partner buys the other out, you need not pay taxes on buyout losses or gains. Before the buyout, determine if you paid your mortgage in full, so you do not bear liability for it when you divorce.
You deserve to have all the facts concerning marital home taxes in divorce. Being well-informed helps you set yourself up for success post-divorce.