Bought/ Sold House Tax Question

[kmdstewart]

What is the name of your state? Maryland

My husband and I sold our house this summer. We made a profit, which we used as a downpayment on a new home. However, the rates we were quoted were so high, we used his Parent's CREDIT to actually buy the house and get better rates. Therefore, HIS MOTHER actually "bought" the house on paper, but it was our $80,000 down payment used and WE pay the mortgage on it. His mother is only the owner on paper.

Problem is: What do we do when it comes down to claiming taxes? If we don't show that we used the profit on the sale of our house to buy a new house, we have to pay taxes on all that money. But if we pretend like the house is in our name... wouldn't we need documenting evidence?
By the way, the title is JOINTLY in my husband and my mother-in-law's name.

[Snipes5]

You have the old tax law confused with the current one.

Current law states that if you have lived in the house and owned it for two of the past five years, profit from the sale is exempt up to $500,000 for a married couple.

However, you can't "pretend" to own a house. That's ridiculous. I would make some effort to get YOUR name on the deed, however, or you could be in for a world of hurt if things in your marriage ever go south.

Snipes

[kmdstewart]

Thank you! That makes us feel much better! (And we are going to switch the title over to his and my name as soon as we switch the loan over to our name. We actually sold/ bought prior to our wedding.)

[Rhubarb297]

Originally Posted by Snipes5

You have the old tax law confused with the current one.

Current law states that if you have lived in the house and owned it for two of the past five years, profit from the sale is exempt up to $500,000 for a married couple.

Snipes

Good advice. He's correct. As long as you owned the house 2 of 5 years, the profit is yours to keep (up to $500K for a married couple.)

[abezon]

Also, as long as you have a legal obligation to pay the mortgage, you can deduct the mortgage interest & property taxes, even though the loan is in Mom's name.