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Get your taxes done using TurboTax
First, this is a situation where it would be prudent to talk to your tax advisor. However, there is some agreement in various tax forums that the following may explain your situation and how to file. Of course, because it's on the internet, doesn't always make it true. I'm sure others on this forum will offer further insights.
Each of you can use up to the $250,000 exclusion on your own house even if you file jointly. You can apply the exclusion rules to yourself in the same manner as if you were single. Each of you would then take advantage of your individual exclusion even if you file jointly.
The part of the rules that address married couples are to confer additional flexibility not to eliminate the exclusion for either of you as an individual.
As an aside, a couple who has been married for a long time but who each have a different primary residence because of a job situation, aka a commuter marriage, can also file apply the law this way. In other words, they may file jointly and yet each use their own exclusion for the sale of the two separate homes.
If either spouse does not satisfy all these requirements, the exclusion is figured separately for each spouse as if they were not married. This means they can each qualify for up to a $250,000 exclusion. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. For joint owners who are not married, up to $250,000 of gain is tax free for each qualifying owner.
See this link for further discussions :https://www.bogleheads.org/forum/viewtopic.php?t=174630
https://www.irs.gov/pub/irs-pdf/p523.pdf
Each of you can use up to the $250,000 exclusion on your own house even if you file jointly. You can apply the exclusion rules to yourself in the same manner as if you were single. Each of you would then take advantage of your individual exclusion even if you file jointly.
The part of the rules that address married couples are to confer additional flexibility not to eliminate the exclusion for either of you as an individual.
As an aside, a couple who has been married for a long time but who each have a different primary residence because of a job situation, aka a commuter marriage, can also file apply the law this way. In other words, they may file jointly and yet each use their own exclusion for the sale of the two separate homes.
If either spouse does not satisfy all these requirements, the exclusion is figured separately for each spouse as if they were not married. This means they can each qualify for up to a $250,000 exclusion. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. For joint owners who are not married, up to $250,000 of gain is tax free for each qualifying owner.
See this link for further discussions :https://www.bogleheads.org/forum/viewtopic.php?t=174630
https://www.irs.gov/pub/irs-pdf/p523.pdf
‎June 6, 2019
1:04 PM