If you each owned half the house, each of you claim 1/2 of everything, the cost basis any improvements, the selling proceeds, not including mortgage payoff. Your income makes no difference whatsoever. You can each take a $250,000 exemption for the house, and if you have no taxable amount of profit over and above the exemption, and did not receive a 1099-S, you do not need to include the sale at all