Getting Married and Selling Homes - Capital Gains Exclusion?

[joygrl626]

I sold my home in January 2024 (lived there alone 3.5 years, made well under the $250k exclusion limit), then got married in June and moved in with him. He has lived in his house for over 4 years. We are looking to sell it in the next few months.

When we file jointly for 2024 taxes, will the $250k capital gains exclusion only apply to the sale of my home? Will we have to pay capital gains on the sale of his house? Is there any benefit to filing separately in this situation?

[DoninGA]

The $250,000 exclusion will apply to each personal residence that was sold.  There is no benefit for filing Married Filing Separately for this situation.

Since you lived in your personal residence for more than 2 years in the 5 year period on the date of the sale, you are eligible for the exclusion.

Since your spouse lived in their home for more than 2 years in the 5 year period on the date of the sale they will be eligible for the $250,000 exclusion on the sale of their home.

[Opus 17]

It doesn't matter if you file jointly or separately.

For your house, it seems you qualify for the $250,000 exclusion.

For his house, he qualifies for a $250,000 exclusion, but there is no way to claim a $500,000 joint exclusion.  Even though marriage imparts ownership (you technically "own" his home for as long as he has owned it), marriage does not impart residency, and you have not lived there 2 years.  

You can claim up to $250,000 on the sale of your home and he can claim up to $250,000 on the sale of his home.  You can do this on a joint tax return even though it is two different homes.