My wife and I are getting a divorce. We're selling our house and hope to make a lil over 60K in profit. Of course we're going to split everything 50/50.
My wife plans on using her half as a down payment on a house. I plan on using my half to pay off my bills. I have about $24k in bills (yikes).
Is there anything I can do to avoid paying taxes on my share? I know I can use it towards my house and avoid getting taxed but then I'm stuck w/ my huge credit card balance. I'm trying to wipe my slate clean.
Am I screwed?
2007-05-30 08:51:32 · 5 answers · asked by kimchee_boi 3 in Business & Finance ➔ Taxes ➔ United States
Title 26, Subtitle A, Chapter 1, Subchapter B, Part III, ,Section 121 of the U.S. Code is the law that applies to you. In general, the law states that the first $250,000 of gain for an individual in the sale of a personal residence is excluded from gross income. ($500,000 for married couples filing jointly). The property will have to have been a principal residence for at least two years of the prior five years before the sale. However, since you are getting divorced, that qualifies as an unforeseen circumstance and then two-year provision may not apply.
Since this is an exclusion provision and not a postponement of gain provision, you do not have to buy a new residence. The gain on the property will be tax-free and you use the money any way you wish.
If someone tells you that you have to pay taxes on the gain, remember "Section 121 - Exclusion of gain from sale of principal residence".
http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000121----000-.html
2007-05-30 10:35:03 · answer #1 · answered by NGC6205 7 · 4⤊ 0⤋
If you have lived in the house for 2 of the 5 years before you sell it, up $250,000 in profits for each of you is tax free.
If you are under two years, divorce qualifies as an unforseen circumstance and you receive a reduced exclusion (ie under $250k but probably over $30k).
So, chances are the gain will be tax free.
2007-05-30 09:34:57 · answer #2 · answered by Wayne Z 7 · 3⤊ 0⤋
The capital gains tax applies in basic terms to quantities over 250,000. in case you made a income of 250,000 on your place sale, then particular, you will ought to purchase yet another homestead or in any different case make investments the money interior the subsequent twelve months to sidestep the effects.
2016-11-23 18:57:23 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Use it to buy another house, then get a home equity loan for your credit cards. Is she not repsonibile for half of the credit cards? And I believe If it has been your primary residence for over 2 yrs there want be any taxes on that amout of money anyway.
2007-05-30 09:00:16 · answer #4 · answered by misty m 4 · 0⤊ 3⤋
use the cash to buy another house....after you close...take out a home equity line of credit...payoff your bills...and not only will you not have to pay taxes, you'll get a tax break on the HELOC...
2007-05-30 08:57:42 · answer #5 · answered by jacksonphisig 4 · 0⤊ 3⤋