My husband and I are separated - we sold our house - split the profits. Do I have to claim it on my taxes?

Question

My soon to be ex husband and I sold our house back in June. Our divorce will be final in Jan - 2008. We made a $30,000 profit from the house. We payed off all of our "together" bills. Then split what was left. Do I have to claim my share on the taxes? Or will we need to do our taxes together as married - but seperate?

Answer 1

Regardless of your filing status, the gain on the sale of the house you owned and used as your home is excluded as long as you have lived there for two years in the five years prior to the sale.

Do you have a child who lives with you? If so, and your spouse did not live with you for the last six months of the year, you may be able to file as Head of Household.

If you have no children, and do not have a legal separation or written separation agreement, then you will have to file Married Filing Separately, or you could choose to file Married Filing Jointly. You may together owe less tax if you file a joint return.

If you have a legal separation or written separation agreement, then you could file as Single (or HoH as described above).

Answer 2

1

Answer 3

First of all, married filing separately is the least desirable filing status to be in. If one person itemizies that the other has to itemized as well. Plus there may be other credits and deductions a person may not qualify for using this status. Too bad the divorce is not final this December, then both of you can file single. As far as your $30,000 profit here is the general rule: When a married couple owned and lived in their principal residence for at least two years during a five-year period ending on the date of sale, they may claim an exclusion of up to $500,000 of gain on a joint return. Since you were still married at the time of sale and if you lived in the house for at least two years, then the $30,000 is excluded. You may still want to consider of talkig with your tax advisor.

Answer 4

Maybe you won't owe tax on the sale. If you lived in the home as your main home for two years of the 5 immediately before the sale, and owned it for at least two of those same five years, you can exclude the gain from the sale on the house up to $250,000 for each of you - you don't have to even report it on your tax return.

You can file a joint return if you want to and can agree on it, otherwise you'll file as married filing separately.

Answer 5

I found this online for an answer...hope it helps. Either way you will have to claim the income you should consult both the IRS website and your State Income Tax website for more information.

According to the following sources, you can structure your situation
so that you will both get to deduct $250,000 from the sale, even if
you sell the house after your divorce. This structure is called joint
ownership.

Sincerely,

Wonko

"You and your husband may each to exclude up to $250,000 of gain when
you sell your home, if you have both lived in it for two of the five
years before sale. If your husband has been gone from the house for
more than three years when it is sold, there is a way you can both
still qualify for the $250,000 exclusion. Your old home will be
considered to be your husband's residence if you have been occupying
it prior to sale under the terms of a divorce or separation agreement
or court order. This new rule opens the door to joint ownership of
homes for extended period after divorce."

"Should You Keep Your House After Divorce?" By Ginita Wall, CPA, CFP,
WIFE.org (2003) http://wife.org/suddenly_single/ss.keephouse.htm

"Consider keeping joint ownership of the house. There might be a tax
benefit to retaining joint ownership of the home. If you retain joint
ownership of the home, you might be able to shelter a combined
$500,000 of gain from taxes, when you eventually sell it. If only one
of you owns the home on the sale date, then the most gain that can be
sheltered from tax is $250,000."

"Finance... Who Gets the Home (and Other Issues)" Family Law Software,
Inc. (2006) http://www.familylawsoftware.com/finance/home.htm

"If you and your spouse sell the house upon divorce, you each can
exclude up to $250,000 of any capital gain. In a joint ownership
situation, both parties can also benefit from the exclusion when the
house is finally sold."

"Should you keep the house in a divorce?" Microsoft (2006)
http://moneycentral.msn.com/content/CollegeandFamily/Suddenlysingle/P80537.asp

Search terms: house sale divorce "joint ownership"; house sale divorce

Comments
Subject: Re: Tax issues when selling house
From: t_r-ga on 10 Jan 2006 11:50 PST

You pay Taxes on Profits above $250K.
So if you sell the house, give your wife 1/2 of the profits, then you
pay taxes on profits above $250K. Its really no different that if you
were married.

Subject: Re: Tax issues when selling house
From: good_comments-ga on 10 Jan 2006 21:18 PST

I think that i can offer some answer on this issue. Since I am not
listed as researcher you can reply me at mitconpl at eth dot net to
see if the advise is of use to you.

Mukul Mittal

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