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No, you will not need to report on your tax return any profits from the sale. You are not part owners just because you pay the mortgage. You would actually have to be on the deed for you to be considered a partial owner of the property.
Additionally your parent can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse So if this home was used as a primary residence for your parent, there would be no reporting requirement if the gain is less than the exclusion amount.
See this IRS link for more information on the exclusion:
https://www.irs.gov/taxtopics/tc701.html
However, if you are on the deed (because a portion of the house was gifted to you) and this was not your primary residence, you would have to report any gain on the sale as the gain on the sale of a capital asset (You do not report a loss on the sale of a personal capital asset). You would only need to report the gain on your percentage of the house.
To enter this transaction in TurboTax Online or Desktop, please follow these steps:
Click this link for further information about reporting the sale of a capital asset
No, you will not need to report on your tax return any profits from the sale. You are not part owners just because you pay the mortgage. You would actually have to be on the deed for you to be considered a partial owner of the property.
Additionally your parent can take the gain exclusion as long as you considered the home your "primary residence" for 2 of the last 5 years. If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse So if this home was used as a primary residence for your parent, there would be no reporting requirement if the gain is less than the exclusion amount.
See this IRS link for more information on the exclusion:
https://www.irs.gov/taxtopics/tc701.html
However, if you are on the deed (because a portion of the house was gifted to you) and this was not your primary residence, you would have to report any gain on the sale as the gain on the sale of a capital asset (You do not report a loss on the sale of a personal capital asset). You would only need to report the gain on your percentage of the house.
To enter this transaction in TurboTax Online or Desktop, please follow these steps:
Click this link for further information about reporting the sale of a capital asset
Have a similar situation and need to confirm ownership percentage
Myself, my mother and her husband all on deed as joint tenants. I believe this means we own 1/3 each. Property is primary home for my mother and her husband. I do not live in the property.
My mother's husband executed a interspousal transfer deed to remove his name from the deed (Medicaid preparation). It was signed between them and I am not a party to this transfer document. I'm assuming after this, my mother and I are joint tenants. However, she owns 2/3 and I own 1/3. Is this understanding correct?
We plan to sell the property soon and ownership % would determine how much tax each of us pay. She and her husband does qualify for the $500k primary home exemption.
"....Medicaid preparation.."
@Anonymous I am not going to comment on your tax situation regarding the house. But I am going to advise you to seek the advice of an elder law attorney. Are you aware that there is a five year lookback for the disposal of assets when a person goes on Medicaid? So your plan to sign the house out of your mother's spouse's name may end up biting them and/or you. Please seek legal advice before you proceed.
Thanks for the comment. The inter-spousal transfer was done per direction from well experienced elder law attorney (On advisory committee with WA state Medicaid office). WA Medicaid law follows the federal law that married couple can gift infinite amount of asset t to each other and does not fall under the 5 year look back rule. This enable the first spouse to go onto Medicaid while sheltering the asset for the 2nd spouse's use. Of course when its time for the 2nd spouse seeking Medicaid long term care, they can not shelter the asset via spouse.
Of course Medicaid rules are somewhat different for every state so definitely consult elder law attorney for the state in question.
Thanks for step b step "if your name was on the deed. Mom deeded the house to 4 0f us but keep her name on the deed as Grantor/grantee. She is in a nursing facility and we sold the house. Her one fifth took a loss due to added value. However, the value of the home when gifted in 2004 and the appraised value at that time (taking 1/5) each was lower than 1/5 of the added value used for Mom. As I read the IRS reg, we take the lesser value. leaving us some capital gain. However the Total sale was 104 K give or take a few $s. Comments welcomed
Different states have different laws. How she deeded the house to you and in what state makes a difference.
A "Life Estate Deed", which you might have used, passes the ownership at death, but it sounds like you sold it before that date.
We try to answer all your questions, but this is one that you need to ask a local real estate attorney about.
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