topic Can a joint filing couple claim different primary residence if they live separately? in Get your taxes done using TurboTax

Can a joint filing couple claim different primary residence if they live separately?

Frank2 — Sat, 01 Jun 2019 00:48:46 GMT

My wife and I own two homes jointly. We file tax jointly as well. However, we live separately in the last five years. If we sell both homes this year, can we claim both homes as our primary residence separately, and hence each getting a $250K gain exemption? Or we can claim only one primary residence since we file jointly. If so, can we elect to claim the home with higher appreciation? Thanks.

Yes. You each get a $250K gain exclusion, filing jointly...

Hal_Al — Sat, 01 Jun 2019 00:48:48 GMT

Yes. You each get a $250K gain exclusion, filing jointly or separately.

Reference JK Lasser's Your Income Tax 2015 , section 29.3, pg 527. https://books.google.com/books?id=wSeRCgAAQBAJ&pg=PA531&lpg=PA531&dq=when+a+husband+and+wife+own+and... (scroll down)

Thanks for the answer, Hal_Al. However, I read another re...

Frank2 — Sat, 01 Jun 2019 00:48:51 GMT

Thanks for the answer, Hal_Al. However, I read another related article on this forum, in which the video provided by Intuit clearly states that IRS allows only one primary residence for a couple file jointly. If that's the case, how can we each claim a $250K gain? My understanding is that the exclusion only applies to primary/principal residence.

Thanks

Provide the link for the intuit video. I've added the lin...

Hal_Al — Sat, 01 Jun 2019 00:48:53 GMT

Provide the link for the intuit video.
I've added the link for my reference, above.

Yes, here it is:
Frank2 — Sat, 01 Jun 2019 00:48:54 GMT
Yes, here it is:

<a rel="nofollow" target="_blank" href="https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Video--Can-We-File-Two-Primary-Residences-if-Filing-a-Joint-Tax-Return--/INF20716.html">https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Video--Can-We-File-Two-Primary-Residences-if-Filing-a-Joint-Tax-Return--/INF20716.html</a>

The Intuit video assumes the couple lives together and do...

Hal_Al — Sat, 01 Jun 2019 00:48:54 GMT

The Intuit video assumes the couple lives together and does not address your situation.

Hmmm, I guess I didn't see that assumption made in the vi...

Frank2 — Sat, 01 Jun 2019 00:48:56 GMT

Hmmm, I guess I didn't see that assumption made in the video. I will watch it again. Thanks a lot, Hal_Al.

See section 121(b)(2) of the Internal Revenue Code:
dmertz — Sat, 01 Jun 2019 00:48:58 GMT
See section 121(b)(2) of the Internal Revenue Code:  <a rel="nofollow" target="_blank" href="https://www.law.cornell.edu/uscode/text/26/121#b_2">https://www.law.cornell.edu/uscode/text/26/121#b_2</a>

With neither spouse meeting the residence requirement of the other spouse's primary residence, each spouse gets a separate exclusion of up to  $250,000, as if not married, and the two exclusion amounts add together on the joint tax return, as indicated in section 121(b)(2)(B).

(The fact that the video assumes a couple living together must be inferred by comparing to section 121(b)(2).)

Very help information. Thanks.

Frank2 — Sat, 01 Jun 2019 00:48:59 GMT

Very help information. Thanks.

Another interesting question following dmertz's comment...

Frank2 — Sat, 01 Jun 2019 00:49:00 GMT

Another interesting question following dmertz's comment

"each spouse gets a separate exclusion of up to $250,000, as if not married, and the two exclusion amounts add together on the joint tax return,"

is that in order to avoid any tax on the gains from selling the two houses, do the profits from the houses have to be both below $250K? For example, if one house makes $100K, and the other makes $300K. Does the second one have to pay tax because the corresponding spouse can only exclude $250K?

Yes. In your example, the spouse with the $300K gain wi...

Hal_Al — Sat, 01 Jun 2019 00:49:01 GMT

Yes. In your example, the spouse with the $300K gain will have to pay tax on $50,000 of the capital gain. He cannot use the other spouse's unused $150K