Question

Capital Gains Exemption

Forum|Forum|1 year ago
October 7, 2024
2 replies
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Hello, is a couple in a Registered Domestic Partnership eligible for the $500,000 capital gains exemption? Thank you

Not A Product Question

Employee

To be eligible the $500,000 capital gains exclusion on the sale of a personal residence you need to be legally married.

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

rjs

Employee

The $500,000 exclusion can only be claimed on a joint tax return. With an RDP you cannot file a joint federal return. You have to each file a separate federal tax return. But you didn't say who actually owned the home or how long each of you lived there. You might each be eligible for the $250,000 exclusion on your individual federal tax returns if you each satisfy the requirements separately. That would be the case if, for example, you owned the home jointly for 2 of the last 5 years and you both lived in the home for 2 of the last 5 years.

A

ag112659Author

Thank you for your response. I own the home and we have lived there together for close to twenty years. I will look into putting her on the deed. Have a great day😊

rjs

Employee

There are some complications in "putting her on the deed," and it might not be the whole solution. You definitely need to consult a real estate lawyer and a tax professional before putting her on the deed.

First of all, to qualify for the exclusion of gain she would have to be on the deed for at least two years before the date of the sale. And she would also have to have still lived in the home as her primary residence for at least two years out of the five years prior to the sale.

Putting her on the deed also means that you are making a gift to her of a partial ownership interest in the home. Whatever percentage of ownership the two of you agree on, I assume that the value of the share that you give her would be more than $18,000, so you would have to file a gift tax return, Form 709. You would not have to pay any gift tax unless the total of all gifts you have given in your lifetime, to anyone, is more than $13.6 million, but you would have to file the return. The gift reduces your lifetime estate and gift tax exclusion. You cannot file a gift tax return with TurboTax.

(The $18,000 and $13.6 million figures are for 2024. They are adjusted for inflation every year. If the 2017 tax reform law is not extended, the $13.6 million lifetime exclusion will be cut in half starting in 2026.)

When you eventually do sell the home, since her share was a gift from you, her basis will be the same as your basis for the share that you gave her. So her capital gain will include all of the gain on her share since you originally bought it, not just the gain since she became a part owner. The two of you would be splitting the total basis and gain in proportion to your percentages of ownership, but she doesn't get any break on the amount of capital gain because of having been an owner for a shorter time.