Married in 2017. I have home. Wife has house. I sold my house in 2017. 2018 will purchase home. Sell wife house 2018 or 2019. Should we file married separately?

[okane01]

Newly married in 2017. I sold my home in 2017 (the year we were married). I moved into my wifes home after we married. We will move into a newly purchased home November 2018. For tax year 2017 I propose we file as each married, separately and I put sell of my home on my taxes and take the 250,000 exclusion. We will probably sell my wifes home in 2018 or 2019. So for tax year 2018 or 2019, I propose we both file married separately, but my wife reports sell of her house, and takes the 250,000 exclusion. Years thereafter sell of wifes home, we will begin filing married jointly. We itemize for deductions since itemizing is better then the standard deductions. I've read Pub 523.  Is this the best way to handle taxes for our situations, years 2017, 2018, and/or 2019 (depending on if we sell my wifes home in 2018 or 2019)?

[Phillip1 · Accepted solution]

What you suggest will work, but it is not necessary.

You can file joint returns for all of the years at issue. The home sale exclusion can be used on a separate basis even if you file a joint tax return.

You can use your 250,000 dollar exclusion on the sale of your home on your 2017 return (make sure you indicate that you are the only owner and only one that qualifies for the exclusion on the sale of your home). Your wife can use her 250,000 dollar exclusion on the sale of her home in 2018 or 2019 (make sure you indicate that your wife is the only owner and only one that qualifies for the exclusion on the sale of your home). After the sale of your wife's home, you cannot have a home sale exclusion (for a home you own jointly) until two years after the tax year when you sale your wife's home.

Filing separate returns results in a less favorable tax outcome in almost every situation (I have never seen separate returns result in a better tax outcome than a joint return in my 12 year career).

[RtAtcchick]

I have a similar situation and was trying to do our taxes on TurboTax.  I sold my house in October of 2018.  We bought a new one together in November of 2018.  I filed single in 2018 and was able to use the capital gains exclusion.  We married in April of 2019, sold his old house in June of 2019.   I'm trying to file us jointly, but you say that you have to make sure to state that he is the sole owner of the house and therefore entitled to his own capital gains exclusion.  ***I don't know how to delete my message.  I went back in and tried again and I was able to differentiate between the two solely owned houses.