Does your spouse have to be on the title to qualify for the capital gains exclusion? Or is filing jointly on our taxes enough?

[tamingov622]

I purchased a home in 2008 in California. I was single then and only one in deed. I'm now selling the property and married. Does my spouse need to be on the title to qualify for the $500,000 tax exclusion? Or is filing jointly enough?

[TomD8]

Filing jointly is enough, IF you and your spouse both meet the "use test."  That means you both lived in the house as your primary residence for at least two of the five years leading up to the date of sale.  Here is the IRS rule:

 You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true.

1. You are married and file a joint return for the year.

2.  Either you or your spouse meets the ownership test.

3. Both you and your spouse meet the use test d uring the 2-year period ending on the date of the sale.

4.  During the 2-year period ending on the date of sale, neither you nor your spouse excluded gain from the sale of another home. 

https://www.irs.gov/publications/p17/ch15.html

[demaurino12]

What happens if you both don't meet the requirements? Spouse 1 owned and lived in home for more than 2 years but spouse 2 just moved in. Would it be best for them to file separately so at least spouse 1 will be exempt but spouse 2 have to pay capital gains tax?

[Hal_Al]

@demaurino12 

You can still file as married Filing Jointly (MFJ).  But, because only one of you meets the use test, your capital gain exclusion will be limited to $250,000 (not $500,000). 

That is, you may exclude the entire amount of the capital gain, but no more than $250,000.  TurboTax can handle this idiosyncrasy. 

[Notei9]

Is it enough?

[Anonymous_]

---

@Notei9 wrote:

Is it enough?

---

It has been stated in this thread repeatedly - to qualify for the $500,000 exclusion:

File jointly with both meeting the use test and either meeting the ownership test.

[DoninGA]

---

@Notei9 wrote:

Is it enough?

---

For a married couple filing jointly, only one spouse has to meet the ownership requirement.

No, the spouse is not required to be on the title for the $500,000 exclusion when married.  But the spouse MUST have lived in the home for at least 2 years during the previous 5 years on the date of sale.

If you owned the home and used it as your residence for at least 24 months of the previous 5 years, you
meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period, and it doesn't have to be a single block of time. All that is required is a total of 24 months (730 days) of residence during the 5-year period. Unlike the ownership requirement, each spouse must meet the residence requirement individually for a married couple filing jointly to get the full exclusion.

[medaglia68]

My wife and I will be selling the house that is under my name just after 2 years of my ownership - so we qualify for one spouse in the ownership test. I only own this home and I am on title as my principal residence so clearly this proves my residence test, but what about my wife? How do I prove her residence for those 2 years? The USPS won't turn over the change of address to us.

[PattiF]

Here are some other items that the IRS accepts to show that the home is one's main home.

You may take the exclusion, whether maximum or partial, only on the sale of a home that is your principal residence, meaning your main home. An individual has only one main home at a time. If you own and live in just one home, then that property is your main home. If you own or live in more than one home, then you must apply a "facts and circumstances" test to determine which property is your main home. While the most important factor is where you spend the most time, other factors are relevant as well. They are listed below. The more of these factors that are true of a home, the more likely that it is your main home.

• The address listed on your:

  1. U.S. Postal Service address,

  2. Voter Registration Card,

  3. Federal and state tax returns, and

  4. Driver's license or car registration.

• The home is near:

  1. Where you work,

  2. Where you bank,

  3. The residence of one or more family members, and

  4. Recreational clubs or religious organizations of which you are a member.

Finally, the exclusion can apply to many different types of housing facilities. A single-family home, a condominium, a cooperative apartment, a mobile home, and a houseboat each may be a main home and therefore qualify for the exclusion. See IRS Publication 523 for this information.