Capital gains on sale of house

[eichjam]

How do I figure capital gains when the house was built from scratch?  Parents bought land for $25,000 25 years ago.  Then built house on said land using $150,000 from a 401k.  Parents divorced in 2009.  Mom retained house and refi to be in her name only.  Step dad died in 2017.  Mom sold house in 2024 for $490,000.  At time of sale she had a mortgage from the refi in 2009 of $146,000.  Used proceeds to purchase another home.  Is the cost basis $25,000 + $150,000 + any improvements done like a new deck, furnace and AC?  Then subtract that from the $490,000 minus all the realtor fees associated with the sale?

Mom is 77 and her income is about $38,000 annually from SSI and a couple pensions.  Will she even have to worry about capital gains since she is under the $47,000 income for capital gains?

[Mike9241]

Under Internal Revenue Code Section 1041, transfers of property between spouses during a divorce, or former spouses incident to a divorce, are generally treated as non-taxable events. This means that the receiving spouse often takes on the carryover basis of the transferring spouse. In simpler terms, they inherit the original cost basis of the property.

so the tax basis is $25,000 + $150,000 + any improvements done.  

$490K is the selling price

closing costs such as realtor fees and other costs like transfer taxes are selling expenses.

it would seem your mom owned and occupied the property as her principal residence for 2 out of the 5 years before the sale. Thus she can exclude $250K (home sale exclusion) of the gain from taxation

In Turbotax use the home sale worksheet.

how this affects her taxes is unknown the gain is on top of other taxable income and it could make more of her Social Security taxable.

the best way to find out what her taxes would be is for her return to be prepared.