Do I need to add my wife (just married) to the deed of our primary residence order to avoid paying tax on the $400k capital gain when we sell next month?

[pswong8]

My fiance and I purchased the home 4 years ago and have lived here as our primary residence. She stays home with the kids so she was not on the loan or deed. We are planning on selling our home and looking at a gain of $400k so we eloped last month. My research shows we only need to file as married filing jointly, but our realtor mentioned that another client from the past had a problem with their capital gains taxes from sale of their property and mentioned we should make sure.

[Hal_Al · Accepted solution]

 No, putting her on the deed for a few days would not satisfy the two year ownership rule. But, there is an exception for your situation. Only one of you needs to  have owned the home for 2 years.

You do need to file  as Married Filing Jointly (MFJ). And there are two more rules to meet. 1. You both must have resided in the home for at least two years prior to the sale to exclude up to $500,000 (instead of $250,000 for a single person).  2. Neither of you previously claimed a home sale exclusion within the last two years. You appear to meet these rules.

Reference: JK Lasser's Your Income Tax section 29.3

Additional reference: https://www.irs.gov/publications/p523 Which says:

"Marriage. 

Married individuals may exclude up to $500,000 of gain if they file a joint return and neither spouse excluded gain on the sale of another home within a previous 2-year period. If one spouse meets the ownership requirement, both are considered to have met the requirement. See Eligibility Step 2—Ownership , earlier. However, each spouse must individually meet the residence requirement. See Eligibility Step 3—Residence , earlier."