I became a widow January 4 2008, what is the time period which I can own the old house without a capital gain?

Asked by Angela Rauschuber, San Antonio, TX Thu Feb 5, 2009

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Matt Stiglia…, Agent, San Antonio, TX
Thu Feb 5, 2009

I am sorry to hear of your loss.

Most of the advice you have read is good advice. I wanted to add a few things to be sure you're looking at it from the right perspective.

First off, you must have lived in the home for two of the past five years. This time does not have to be consecutive; you could live in the home for the first year, rent it for the next three, and then return for the final year of the five (for a total of two years lived in the home). This qualifies you for the exclusion. You must also have owned the home as your main residence (ie, not an investment property).

The exclusion is $250,000 per individual and $500,000 for a married couple. There are provisions in the tax law for surviving spouse which a tax adviser can walk you through. Regardless of what you do with the home, I would definitely recommend having a tax professional go through your current taxes as your situation has changed and (outside of the home), there may be new rules that apply to you as a surviving spouse.

As long as you continue to stay in the home as your primary residence (and have lived in it or will live in it for two years in regards to the 2 out of 5 years rule) and you don't project your profit (gain) to be more than $250,000, you really don't even need to think about it too much (other than to make sure you fill out the tax form correctly). If you plan on making more than that upon the sale of your home, then you would definitely want to sit and chat with a tax professional.

If you live in the house less than the necessary two years, there are ways to still avoid some capital gains tax (basically you are given a ratio of the time lived n the home - ie, one year lived in the home is 1/2 the necessary time, so you would get one half the exclusion - as a married couple, $250,000 or single, $125,000).

Again, I definitely recommend a tax professional - the calculation of the "cost basis" of your home isn't just what you paid for it, but the total of the purchase price, buying costs - title and escrow fees, real estate agent commissions, etc., improvements such as a new roof or a new furnace, selling costs - title and escrow fees, real estate agent commissions, etc. minus the accumulated depreciation (for example, if you ever took the office in the home deduction). This "cost basis" subtracted from your sales price (when you do sell it) is your gain (loss if the number is negative, which I hope its not!).

I know that's a lot of information, but I wanted to give you some other bits of information that hadn't been covered. I hope it helps and please remember, you're best off speaking to a tax professional on this issue to be sure you get all of the appropriate tax deductions, exclusions, etc. and make the most of your money. No one likes to give more than they have to!

I wish you the best in this tough time for you. If I can be of any assistance, just let me know.
Web Reference:  http://www.mattstigliano.com
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Josh M. Boggs, Agent, San Antonio, TX
Thu Feb 5, 2009
Hello Angela,

I'm deeply sorry about your loss. You are in our prayers.

It looks like Carole has given you some great information regarding the new tax law changes in capital gains. I believe you won't have much to worry about in regards to capital gains. According to Bexar county, and unless I have the wrong home (Indian..P) it looks as though you are the only one on title anyway? In case you do need to speak to a CPA to make sure; I would be more than happy to refer you to a very helpful and reputable accountant.

God Bless,
Web Reference:  http://www.eXposedHomes.com
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Carole Tubbe…, Agent, San Antonio, TX
Thu Feb 5, 2009
First, let me tell you that I am very sorry for your loss.

With respect to your current house, I think you may be asking about the time period you have to sell your house and obtain the full $500,000 in tax free gain that you would have had when your husband was alive and you filed your taxes jointly. The tax law changed beginning in tax year 2008 to allow a widow or widower to get the full $500,000 in tax free gain if the widow sells the house in the year the spouse died or the following tax year, so long as the sale is complete within 2 years of the death of the spouse. This change in rule would allow you to get the full $500,000 exclusion if you sell your current home in 2008 or 2009, assuming that you and your husband met all the other tax rules for qualifying for the full exclusion prior to his death.

The information I am providing here is meant to get you started in exploring this issue, and is not meant to be a substitute for the advice of a professional accountant. You should look at IRS forms "2008 Instructions for Completing Schedule D" and "Publication 523" to get the complete details for how these rules will apply to your situation, and also consult with your accountant or tax attorney on these issues.

I hope this information is of some help to you. I would be happy to help get you started looking for a new home and selling your current home when you are ready.


Carole Tubbesing
Realtor, Phyllis Browning Company
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Terrence Cha…, Home Owner, Allentown, PA
Thu Feb 5, 2009

I am sorry for your loss.

There are no capital gains until you sell the home. And if you sell the home to purchase a home, there are no capital gains.

Get with a tax expert for more precise answers and dialog.

Terrence Charest, e-Pro
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