My Mom sold her house and now resides in our home. What taxes should I be aware of in this transition? She is 81.

[Bsch4477]

If she owned and lived in her home 2 of the last 5 years she can exclude $250,000 from her capital gain on the home sale. Her gain is the net selling income minus the original cost and any capital improvement costs. If her income is low enough she might also escape more of her capital gains tax. 

[Hal_Al]

If the home had been previously owned jointly by both your parents, half the cost basis "stepped up" on the death of her husband (the entire cost basis stepped up if they lived in a community property state).  This would reduce the capital gain amount.

[mattbkwon]

If my mom's capital tax is zero due to step up basis in community property after her husband's death and the death appraisal value is greater than selling price, does she need to file taxes? No refund or taxes owed for federal and state.

[Bsch4477]

She would owe no tax on the home sale but would have to file a return if she received form 1099-S or had other income enough to have a filing requirement. 

[mattbkwon]

Thank you. 

Date bought or acquired date is original purchase date or when her husband died to get step up basis? 

[DianeW777]

Yes, the date of original purchase would be the acquired date for the home sale. Filing requirements are always based on taxable income and not such things as cost basis that would actually reduce it.  The IRS begins with what is received as income and the taxpayer has to show why it may  not be taxable.

Community property.

In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return.

@mattbkwon 

[Edited: 02/18/2025 | 8:31 AM PST]

[mattbkwon]

On Turbotax Deluxe, does my mom put the sale price which is lower than the appraisal value on the purchase price since there is no where to put the full step up basis? Example: original bought year 2000 for $100k, sold year 2024 for 700k. Enter year 2000 for $700k purchase price due to full step up after her husband passed in community property?

[Bsch4477]

Proceeds is the net amount from the sale of the home. Cost basis is the fair market value at the date of the spouse’s death. The difference is the capital gain.