Taxes on a sale of family home
I am a 90 something widow who has owned the home since 1971. We paid $50,000 than and have added improvements. How do I avoid high taxes when I sell the house for about 500,000 in today’s market? I have 3 children.
I never see this situation mentioned in articles about downsizing or entering a retirement home.
Thanks.
Terry Says
You won’t owe ANY taxes, assuming your spouse died recently. Married couples can exclude up to $500,000 of capital gains on sale of a primary residence. And if your spouse died in recent years (and assuming you owned the house in joint name), then the value of his half was “stepped up” in cost basis to the value of his half at the time of his death. So you might be able to exclude ALL the gains from taxes.
You should be working with a competent tax advisor or CPA who can research the value of the home on the date of his death, raising the “cost basis” of half the home — and possibly getting you to the point where you would owe NO taxes.
And, assuming you die while still living in the home, your heirs (your three daughters) would owe NO taxes, because the value of their inheritance would be stepped up to the value of the home at the time of YOUR death. Again, a good accountant can explain these options more fully.
