Capital Gains on House Sales as part of a Divorce

[StarMaster7]

Hi - Once a divorce is finalized, my understanding is each party is entitled to a $250K exclusion on the capital gains from the sale of the house (which would have been $500K is still married). I wanted to confirm 1) if this is correct, and 2) If as part of a settlement, there is an unequal split of the sales (say for the sake of example a 60/40 split).. is it possible for one party to also take a 60% of the total $500K capital gains exclusion, or is that party locked into only the $250K exclusion since the divorce was recently granted prior to the home sale? Thanks in advance.

[Bsch4477 · Accepted solution]

Assuming that you both meet the exclusion qualifications each would exclude $250,000 as you posted. The IRS has no interest in your divorce agreement. You can split the sale proceeds any way you agree. 

[StarMaster7]

So both parties are limited to the $250,00 exclusion on their individual tax returns... in other words, one party can't claim $350K and the other $150K of the total $500K exclusion. Thanks for the response.

[VolvoGirl]

Right 250,000 max each.  You can’t slit it up.