@akrocks1969 wrote:
Hello. My ex-husband and I were divorced in April 2015. He stayed in the house, I moved out. Part of the divorce settlement was for him to pay me. $65,000. He has had trouble coming up with the money until now. He is selling the house and paying me my money from the proceeds. Will I have to pay taxes on this money? I have been told I will have to roll it into another house purchase within 6 months or I will to pay tax on it. Do I have to buy a house, or can I invest it something else? Thank you.
You are getting some very confused advice from other people. There is no provision to reduce your tax by buying a new home, that was eliminated around 1999 or earlier.
In general, division of assets is not taxable to you or deductible by your ex. However, selling a home can sometimes be taxable to the owners.
First, who owns the home? If you signed a transfer deed when you divorced and it is only in your ex's name, then you have no tax consequences from the sale. If your ex pays you $65,000 then it's not taxable to you no matter how your ex got it.
If you still own the home jointly, you may be subject to capital gains tax when you sell. Capital gains is the difference between the selling price and the amount you have invested in the home (the purchase price plus improvements). If either you or your spouse has lived in the home for at least the last 2 years, then both of you qualify to use the capital gains exclusion even though you moved out. You can exclude the first $250,000 of capital gains each, then any higher gains are subject to capital gains tax.
Unless the home is worth substantially more than $500,000, it is unlikely you would owe any capital gains tax on your share of the sales profits. But you would need to work with an accountant to be sure. If you still co-own the home, your ex can't sell without your signature, so make sure that you get your ex's cooperation on the tax issues before you sign anything, while you still have leverage.
