Do we still get the $500,000 capital gains exclusion if we sell because of divorce?
Answered by Chris Deutsch, Founder & Editor
Licensed Minnesota Realtor #20382264 ·
The short answer
Timing decides it, so this question belongs near the top of the pile, not the bottom. Sell while you're still married and filing jointly, and up to $500,000 of gain on the home can generally be excluded. Sell after the divorce is final, and each of you can typically exclude up to $250,000 on your share — same combined ceiling, but now each person has to individually meet the ownership-and-use tests.
On stage The 60-second answer
Captions on · Transcript below
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The longer answer
Two wrinkles worth knowing. For most Twin Cities homes the gain never reaches these caps, so this is a check-the-box, not a crisis. But for a long-held home that's appreciated past them, the sell-before-or-after question can carry a real tax difference. And the spouse who moved out years before the sale isn't automatically out of luck — the rules let an out-spouse count the other's residence time when it's pursuant to the divorce instrument, which is exactly why the decree's wording matters.
Your CPA and attorney own the timing math — I'm not either one, and this isn't tax advice. My job is flagging it while the window's still open.
The next department over
What people in this spot usually ask next.
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