If I lived in my house for 1 year & 2 months & sold it because of the death of my husband,do I have to pay capital gains on the profit?

[DoninGA]

If you sell your primary home within two years from the passing of your spouse you can claim the $500,000 capital gain exclusion.

If you sold your primary personal residence and you lived in and owned the home for at least two years in the five year period on the date of sale, you do not have to report the sale if your gains are less then the exclusion amounts of $250,000 if filing Single or $500,000 if filing Married Filing Jointly (and both lived in the home for two years).

Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis (Purchase Price plus the cost of improvements prior to the sale)

If you had a gain greater then the exclusion amounts then you would have to report the sale. Also, if you received a Form 1099-S for the sale either with a gain or a loss, the sale has to be reported.

[DoninGA · Accepted solution]

Since you did not live in the home for two years in the 5 year period from the date of the sale you will be eligible for a partial exclusion due unforeseen circumstances, such as a death of your spouse.

Your partial exclusion is 14/24 * $500,000 = $291,667

[Mike9241]

Sorry for your loss. Things that could affect the tax basis and thus affect any reportable gain would include

1) the ownership on the date of death of your spouse - him only, joint ownership, life estate/trust

2) did you become the sole owner after his death 

3) did you live in a community property state?

if your spouse had an ownership interest in the home, some or all of the basis would be stepped up to fair value on the date of death, which will reduce or eliminate any gain on sale. 

also, you may qualify for a partial exclusion due to unforeseen circumstances - death of your spouse.

you may want to furnish additional info to get more info or discuss your situation with a tax pro when filing for 2024 to avoid as much taxes on any gain as possible.  

[Hal_Al]

Q. If I lived in my house for 1 year & 2 months & sold it because of the death of my husband, do I have to pay capital gains on the profit?

A. Simple answer: no.  Death of a spouse is an exception to the 2 year ownership/living in rule. 

But taxes aren't simple. As others have said, how you go about reporting it depends on more details.  You say you lived in the house but don't say whether you also owned it.

The "partial exclusion" (14/24 x $500,000 = $291,667) is actually a reduced maximum exclusion.  If your gain is less than $291,667, you will be able to exclude it all. 

[Opus 17]

If you and your spouse owned the home together, but owned it and lived there for less than two years, and you sold early (less than 2 years) because of the death of your spouse, you can claim a partial exclusion.  Any gain over the partial exclusion amount will be taxable. 

[Opus 17]

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@Hal_Al wrote:

Q. If I lived in my house for 1 year & 2 months & sold it because of the death of my husband, do I have to pay capital gains on the profit?

A. Simple answer: no.  Death of a spouse is an exception to the 2 year ownership/living in rule. 

But taxes aren't simple. As others have said, how you go about reporting it depends on more details.  You say you lived in the house but don't say whether you also owned it.

The "partial exclusion" (14/24 x $500,000 = $291,667) is actually a reduced maximum exclusion.  If your gain is less than $291,667, you will be able to exclude it all. 

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This assumes the spouse died and the home was sold in the same year, when the taxpayer files married filing jointly.

I believe that if the spouse died in 2023, and the taxpayer sold in 2024, the partial exclusion would be based on their single (or surviving spouse) status, and would be 14/24th x $250,000 = $145,000.  

[Opus 17]

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@Opus 17 wrote:

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@Hal_Al wrote:

Q. If I lived in my house for 1 year & 2 months & sold it because of the death of my husband, do I have to pay capital gains on the profit?

A. Simple answer: no.  Death of a spouse is an exception to the 2 year ownership/living in rule. 

But taxes aren't simple. As others have said, how you go about reporting it depends on more details.  You say you lived in the house but don't say whether you also owned it.

The "partial exclusion" (14/24 x $500,000 = $291,667) is actually a reduced maximum exclusion.  If your gain is less than $291,667, you will be able to exclude it all. 

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This assumes the spouse died and the home was sold in the same year, when the taxpayer files married filing jointly.

I believe that if the spouse died in 2023, and the taxpayer sold in 2024, the partial exclusion would be based on their single (or surviving spouse) status, and would be 14/24th x $250,000 = $145,000.  

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Actually, my statement above is incorrect.

If the surviving spouse sells within 2 years of the death of their spouse, and has not remarried, they can claim the full $500,000 exclusion even though they would be filing single or surviving spouse (or, a partial exclusion calculated fro $500,000).  See publication 523, Worksheet 1.