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avolkovic
New Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

 
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13 Replies

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

You can still deduct any mortgage insurance and property taxes that you paid while you co-owned the house.  This will depend on when you moved out, whether you continued to make payments, and so on.  (For example, if you separated in March, you might be able to claim half the interest from January, February and March.)  

Property taxes are a little trickier because they are only deductible when they are paid out of the escrow account.  If your taxes were paid in January using escrow money from the previous year when you were helping to make the house payments, then an answer based on equity and fairness might be that you should deduct half.

Also, if house payments were made from a joint account the simplest assumption is that each spouse paid half.  However, if you weren't working, or made much more or much less income than your spouse, that assumption might be different.

Ultimately there is no fixed rule.  The best situation is to address these items in your divorce paperwork as part of your division of income and property.  If the issue is not covered in the divorce order, you and your ex should try and come to some agreement as to how much of the interest and property taxes you will claim as an itemized deduction.  If, between the two of you, you claim more than the actual total, the IRS will investigate and decide for you.

Because the 1099 form will be in your husband's name, then if you claim a share of the interest and taxes, you will check the box for "I did not receive a 1099" in Turbotax.

The cash you received as part of the buy-out is not taxable income, because money or property that is transferred as part of a divorce settlement is never taxable.  (Transfers that are part of the divorce are different from alimony or maintenance payments that continue after the divorce--those are taxable.)

giraffe1
Returning Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

I have a follow up question to your response. I bought my girlfriend out of her 50% share of our house this year -- can I deduct that amount from my taxes? Note that we were not married. thanks

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

There are no deductions for buying property. 

giraffe1
Returning Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

I've already bought the property. Now I'm paying my co-owner for her share of the house. Can I deduct that payment?

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

The answer is still no.  Buying out the former co-owner‘s interest in the property counts as an investment. It raises your cost basis and may reduce your capital gains when you sell, but it not a tax deduction.  

Stacey1429
Returning Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

My boyfriend bought me out of the home we owned.  Do I have to claim this money on my taxes?

PattiF
Expert Alumni

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

It is a potentially taxable transaction; however, if you lived there for any 24 out of the last 60 months, then you are eligible to exclude the gain. TO EXCLUDE GAIN ON THE DISPOSITION OF A HOME from income under IRC section 121, a taxpayer must own and occupy the property as a principal residence for two of the five years immediately before the sale. ... The law permits a maximum gain exclusion of $250,000 ($500,000 for certain married taxpayers).
 

 

 

@Stacey1429

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I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

@Stacey1429 

Possibly, but you don’t give enough information. Did you buy it together or was it a gift? How much did each of you originally pay? How long did you live there? How much did you receive for the buyout?

Stacey1429
Returning Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

We bought the house together. Originally purchased it for $150,000., refinanced to 170,000. We split the closing cost but I don’t recall the amount. I lived there for 9 years. It appraised for 330,000., in 2021 and I received $80,000, which is the appraised amount minus what was owed and then split the difference

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?


@Stacey1429 wrote:

We bought the house together. Originally purchased it for $150,000., refinanced to 170,000. We split the closing cost but I don’t recall the amount. I lived there for 9 years. It appraised for 330,000., in 2021 and I received $80,000, which is the appraised amount minus what was owed and then split the difference


Your cost basis for your half the house was $75,000.   Your selling price for your half was $80,000.  You have a $5000 capital gain.  Because you owned the home and lived there as your main home for more than 2 years, you can exclude up to $250,000 of capital gains from your income (up to $250,000 of gain is non-taxable).

 

Since the gain is non-taxable, you don't even have to report it on your tax return, unless you got a form 1099-S when you signed the closing paperwork.  If you did get a 1099-S, you have to put the sale on your tax return, but based on your situation, you won't actually pay tax.  

 

There is a second answer as well, which is probably more correct, and which I was reminded of while checking some other instructions.  Transfers of property during or as a result of a divorce are generally never taxable.  If I had remembered that yesterday, I didn't even need to ask for the details.  Still, if you got a 1099-S, you will have to include it on your tax return even though no tax is owed, because the IRS will get a copy of the 1099-S and they will be looking to match it to your return.  

Stacey1429
Returning Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

Thank you that was very helpful

p1NtP03
New Member

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

I have a similar question and wanted to make sure I understand this correctly. My boyfriend bought me out of the house we co-owned. Basis $175k. Sold for 231k but part of that was not realized but just a release from debt. I had not lived there for over 8 years and it was not an investment in that he did not pay me rent. We have no written agreement as a divorced couple would have. If I don't get a 1099S does that mean I don't have to pay taxes on the gain? If I do get a 1099S then do I pay taxes? If so can I add half of the original closing costs to the basis?

Thanks for your help!

I have divorced in September and my husband bought me out on our house(we had mortgage together). How will this affect my taxes this year?

it's the gross proceeds (ie the sales price unreduced for the mortgage) that is the sales price

your tax basis is you portion of the original cost + improvements + any closing cost you paid when you sold it

you report this n form 8949 type F or

in TurboTax, you can use the home sale worksheet and there is also a worksheet/questions for computing your tax basis.

Because you haven't lived in the house for the required period, you are not entitled to the home sale exclusion.

 

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