Special consideration is made by IRS for the sale of a jointly-owned principal residence after the death of a spouse. Surviving spouses may qualify to exclude up to $500,000 of gain (profit) instead of the normal $250,000 exclusion for single people if certain requirements are met.
- The sale needs to take place no more than two years after the date of death of the spouse.
- Surviving spouse must not have remarried as of the sale date.
- The home must have been used as a principal residence for two of the last five years prior to the death.
- The home must have been owned for two of the last five years prior to the death.
- Survivor can count any time when spouse owned the home as time they owned it and any time the home was the spouse’s residence as time when it was their residence.
- Neither spouse may have excluded gain from the sale of another principal residence during the last two years prior to the death.
If you or someone you know has been widowed in the last two years and may have substantial gain in a principal residence, it would be worth investigating if this tax consideration is worth taking advantage of in your situation. Time is a critical factor in qualification. Contact your tax professional for advice about your specific situation. Contact us to find out what your home is worth in today’s market. See opens in a new windowIRS Publication 523 – surviving spouse.