@Stacey1429 wrote:
We bought the house together. Originally purchased it for $150,000., refinanced to 170,000. We split the closing cost but I don’t recall the amount. I lived there for 9 years. It appraised for 330,000., in 2021 and I received $80,000, which is the appraised amount minus what was owed and then split the difference
Your cost basis for your half the house was $75,000. Your selling price for your half was $80,000. You have a $5000 capital gain. Because you owned the home and lived there as your main home for more than 2 years, you can exclude up to $250,000 of capital gains from your income (up to $250,000 of gain is non-taxable).
Since the gain is non-taxable, you don't even have to report it on your tax return, unless you got a form 1099-S when you signed the closing paperwork. If you did get a 1099-S, you have to put the sale on your tax return, but based on your situation, you won't actually pay tax.
There is a second answer as well, which is probably more correct, and which I was reminded of while checking some other instructions. Transfers of property during or as a result of a divorce are generally never taxable. If I had remembered that yesterday, I didn't even need to ask for the details. Still, if you got a 1099-S, you will have to include it on your tax return even though no tax is owed, because the IRS will get a copy of the 1099-S and they will be looking to match it to your return.
