Tax Year Prior to 2020: How should I report taxes on joint owners' house sale?

[tarum44]

We purchased a house with my friend and sold it. We have capital gains. Since we have joint ownership, how should I report the taxes for the house?

[DianeW]

Each of you should report your share of the sale on your individual tax returns. Determine your share of the selling price, sales expenses, purchase price, purchase date, and purchase expenses. Each of you report your portion of the sale.

If this was not your home, you should report the sale as an investment sale.  Please use the steps below to report your sale.

To enter your sale under Investment Income:

1. Choose Stocks, Mutual Funds, Bonds, Other to enter the sale.
2. Say you didn't receive a brokerage statement.
   
3. On Choose the type of investment you sold check Everything Else.
4. Then proceed to add the information about the sale.
5. On Tell Us How You Acquired This Property.
6.  Continue through the entire section. 
7. Click the image attached to enlarge and view for assistance.

If this was your home you will report it as a sale of your home which may allow an exclusion depending on the amount of time you lived there and the amount of the gain.

If you made money on the sale of your house, we can help you find out if this profit is tax-free, up to $250,000 ($500,000 for married filing jointly).  In your case you would each report half of the sale, purchase price, sales and purchase expenses.

Ownership: Determine whether you meet the ownership requirement. If you owned the home for at least 24 months (2 years) during the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement.

Residence: Determine whether you meet the residence requirement. If your home was your residence for at least 24 of the months you owned the home during the 5 years leading up to the date of sale, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period.

Search for home sale > use the "Jump to" link to start your entry.

[axphoude]

Hi,

I have a follow up question to this topic.  I hope this is the best place for it.   

I have a situation where I have a property that I own with my Wife and Farther in Law.   All three of us are on the deed and have an equal stake in the property (right of survivorship).      This is a multi-family home and in the early years we all lived in the house for a couple of years.   We moved out over 8-9 years ago and have been renting our half of the property.  My farther in law still lives there and that is his primary residence.   

So for my question in terms of taxes.   If we go to sell the house, will the $250K capital gain exclusion only apply to my farther in law?     For example:

We purchased the house for $330K, with $10K or so in closing cost, etc.. so our Cost basis is about $340K.   We believe we could sell the house for around $600K, therefore claiming a profit of $260K.   My thoughts were that we split the project 2 ways and the cost basis is also split two ways.   Therefore 340/2 = $170K for each household.   Then the profit is split in half $260/2 = $130K - sale expenses.    So in this scenario you see the profit is less than the cost basis.  Therefore do either parties pay any capital gain taxes?

Thanks,

-Andrew

[DianeC958]

Yes,  the exclusion will only apply to your father-in-law and for his portion of ownership in the property.

Since all 3 of you own the property equally if you chose to sell it the sale needs to also be reported the same way.

Even if you did split it two ways the portion you and your wife have still has a gain on the property that you would report for tax purposes.

The gain you are talking about has already had the cost of the property taken out so the $130 you refer to as gain is the taxable amount to you and your wife.

@axphoude

[axphoude]

So I have to report 2/3rd of the capital gains, not half?   oh boy.

So 260/3 = 86.66 *2 = $173.33?   I'm assuming it's gong to be 15% long term capital gains tax on this?  So $26K?

Also, what happens if we decide to not claim the profits and give it all to my Farther in law?

Thanks,

[ColeenD3]

 You don't have the option of not claiming the profit after it is sold. You can choose to gift the property before the sale, not after it.

Since you rented the property for a time period, you will need to recapture the depreciation you took. This will be taxed asordinary income.

[alok1981]

How would we determine the purchase price of that piece of land?

How do we calculate the adjusted cost basis in this case?

Thank you in advance.

Alok

[VictorW9]

Land is not a depreciable asset. So, when you bought the property, the purchase price is made of improvements to land which includes the building and the land itself. The improvements to land is the amount that is depreciated if your property was ever used for a business purpose. You can find these values in the property records in the state where you bought the property. When you have the value of the land, you can then compare that with the price paid for the land. Being that this is your main home, you should qualify for the capital gains exemption. You may have to take the proportionate amount of the capital gain exemption ( $250,000 for single and $500,000 for married filing joint) and figure any capital gains that may be subject to tax. Hopefully, there should be none.

[cc12389]

My wife and I sold our home in 2019. We now have to report the sale and are wondering who had to report it on our tax return? We lived in there since 2014 and both are under the tittle. Do we just split everything down for reporting purposes? 

Thanks

[VictoriaD75]

Yes. You can split it in any manner your choose, such as 50-50.

When a married couple sell their primary residence that they have lived in for at least two of the last five years, the IRS allows a capital gain exclusion for that sale.  For a married couple filing separately, the exclusion is up to $250,000 for each spouse, and up to $500,000 for a married couple filing jointly. For more information on the capital gain exclusion see this Link:

Sale of Your Home

To the sale of your home follow these steps:

• Go to Federal Taxes

• Select Wages & Income

• Expand the menu for "Less Common Income" 

• Select Start/Revisit next to Sale of Home and answer the questions on the screens that follow

[cc12389]

I am in canada. Are you able to answer the question for canadian tax laws?

[VictoriaD75]

No. However, here are some useful links for our TurboTax Canada site.

TurboTax Canada

TurboTax Support Canada

[hchegini90]

Hello,

I co-own my primary home with my mother. I lived in the home the last 3 years by myslef and now looking to sell. I was wondering when reporting the sale, can I claim the entire profit from the sale?

I am able to utilize the $250K exception by doing that. However, my mother will be selling her primary home next year and by letting me claim all of the profits, she can utilize the exception for her own primary home. 

If not, is it best for my mother to gift her portion of the home to me before the sell?

Thank you in advanced for the help

[DavidD66]

No, you cannot claim the entire sale (and thus the profits) as your own.  If you co-own it, each of you will have to report 50% of the sale and profit.  If your mother gifts the house to you, it will be yours, and you will claim the entire amount.  If her share of equity is more than $15,000, she will need to file a gift tax return.  She won't have to pay gift tax but the form needs to be filed.  For more information, see:  https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-tax... 

[hchegini90]

Thank you for your response. Is the 50% division fixed or can it be adjusted? 

Reason I ask is because I have paid and claimed the property taxes for the entire time. 

Thanks again for your help.