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Sell two houses in the same year

Forum|Forum|7 years ago
June 3, 2019
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My wife and I purchased our own house separately before we get married. I work in VA and she works in MD. My driver license is using my VA address and she is using her MD address. Mail were sent to separate addresses too. We all live in our own houses for more than two years. So if we want to sell both houses in the same year and move together. Can we get tax exemption for both houses if there are gains? From my point of view, both houses are our primary residence. But how should I fill the tax form? Do married filing separately?

Best answer by Opus 17

You don't need to file married separately, however, each of you only gets the $250,000 exclusion on their original home. Or, if you have a house with a larger gain than that, you could combine your exclusions and use a $500,000 exclusion for one house and then pay the gains tax on the other.

O

Opus 17Answer

Employee

You don't need to file married separately, however, each of you only gets the $250,000 exclusion on their original home. Or, if you have a house with a larger gain than that, you could combine your exclusions and use a $500,000 exclusion for one house and then pay the gains tax on the other.

W

wewe5dfbbAuthor

Thank You!

Carl11_2

Employee

you could combine your exclusions and use a $500,000 exclusion for one house and then pay the gains tax on the other.

No, you can't combine your exclusion for one house. You must have *BOTH* lived in the house for at least 2 of the last 5 years you owned it. Since each of you did not have an ownership stake in the other's house, that nixes the combining stuff right there. You each get a $250,000 exclusion on the house you own. That's it.

Also, don't file separate. That just makes no sense tax-wise. (unless you like paying more taxes of course.)

B

Bees

Employee

you can't get the $500k on one property. The rules say both people must have lived in the property for two years.
see
Each of you would likely only get the single personal section 121 exemption. See
http://www.americanbar.org/newsletter/publications/gp_solo_magazine_home/gp_solo_magazine_index/maritalresidence.html Married taxpayers qualify for the $500,000 exclusion under the following conditions:

The parties file a joint return for the year of sale.
At least one spouse satisfies the two-out-of-five-years ownership requirement.
Both spouses satisfy the two-out-of-five-years use requirement.
Neither spouse is ineligible because he or she used the exclusion in conjunction with a previous sale within two years of the date of the current sale
example As for newlyweds, assume A and B plan to buy a new home together and sell the homes each lived in prior to the marriage. Neither party satisfies the ownership and use requirements with respect to the other’s premarital home. A and B have gains of $200,000 and $300,000, respectively, incident to the sales. Whether they file jointly or individually, A’s $200,000 will be fully excluded by the $250,000 exclusion, whereas $50,000 of B’s gain—the excess over the $250,000—will be subject to tax. B may not use A’s unused exclusion on B’s gain in excess of the $250,000 limit.

Disclaimer: Not a tax professional. Information gathered from internet links. Anything dated in June 2019 was posted in prior years and is before the 2019 limits and changes.

1

16mcclung

I am in the same situation. I owned my own house and my husband owned his own house prior to us getting married. We both qualify for the 2 year of the past five in our own homes. We are wanting to buy one home together. My house is up for sale and currently under contract. We probably won't be selling his until next year (being we are already almost at November). Would I be able to get the exclusion and he get his on his sale of house next year? Instead of doing the 500 for married? Neither properties would have gains near the 250 mark in either case. PLEASE let me know asap.

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TomD8

Employee

@16mcclung -- In your situation the exclusion is figured separately for each spouse as if you were not married. This means you can each qualify for up to a $250,000 exclusion.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.