Getting Married, Selling Homes and Taxes

[mtbnutty]

What is the name of your state?California
My girlfriend and I getting married late in 2005. We each have lived in our own homes for several years. She has less than 250K in equity in her home and I have more that 250K in equity in mine. We would like to sell her home and move into mine. She would qualify for the capital gains tax exclusion rule. Question: After we marry, and she moves in with me, can we sell my home and qualify for capital gains exemption (up to 500K)?

Or restated, how can we sell both homes and avoid ALL capital gain taxes?

 

[Dandy Don]

Impossible to avoid capital gains taxes. Consult with a local tax accountant or CPA to figure out the most advantageous strategy to pursue.

 

[abezon]

Nothing's impossible. Your best bet would be for her to sell her home & live in your house for 2 full years. If you are not yet married by 12/31 of the year she sells her home, she just excludes the gains on her personal return. If you are married by 12/31, you two can still exclude the gains based on the reduced exclusion rules. The excludable amount is the amount each of you could have excluded if you'd filed single ($250,000 for her, $0 for you).

2 *full* years after she sells her house, you'll qualify to exclude up to $500,000 of gains on the second home if you file a joint return. You do not need to put her on the title, but she does need to live in your house for at least 2 years before the sale.

You should probably see a tax pro in the year she sells her house.