Cap gains

[Vinnie2316]

my wife and i own a house with my daughter and son-in-law. We are all on title and the loan. My daughter and  son in law live in the house and we split all costs.( payment taxes insurance).  When we sell the house or they refinance and buy us out of loan do me and my wife have to pay cap gains. 

[Mike9241]

you are partial owners of the house so the sale would be taxable to you as a long-term capital gain. since you don't live there no home sale exclusion is available to you. if you want you could gift your ownership to your daughter and son-in-law. likely gift tax returns would need to be filed but it's unlikely you would pay any gift tax.  this way you avoid the capital gain tax on the sale. your relatives get your tax basis. when they sell their gain is the sales price less the sales expenses and less their tax basis + yours. if they meet the exclusion rules, currently up to $500,000 of the gain is not taxed. other options are possible and should be discussed with a tax pro.

[Vinnie2316]

Thank you

[Hal_Al]

You can do a combination sale and gift.  You can sell you share to them for an amount equal to your cost basis (generally what you originally paid). That way you have no taxable gain.  If the home is worth more than what you paid for it, you will be making a gift of equity to your kids.  That gift amount is subject to reporting on a gift tax return, if the amount exceeds the annual exclusion, currently $16K per person ($32K to a married couple). 

If you sell the home to family, at a loss, you are not allowed to claim a deductible capital loss.