Divorce law can be very complex and difficult to understand, but they can have a far-reaching impact on your future. When you throw tax law into the mix, the confusion for many of us can increase dramatically. Aside from the conceptual difficulties these laws can have, if you find yourself selling a house during or after a divorce, then you'll likely be adding a lot of additional stress to the situation.
If you are considering divorce but unsure of your legal rights, a local attorney might be able to help you. A divorce lawyer can help show you what your options are and help you determine what you should do to make the best of a tough situation. If you'd like to contact a local attorney today, just fill out the short below.
Often, a couple agrees to sell the marital residence or the court orders the house sold in order to distribute its value or because neither party can afford to keep up the mortgage payments and maintenance alone. But how might selling your home impact your tax obligations?
In many situations, you'll have to pay tax on the profit made from the sale of your family home. However, tax law does allow home sellers to avoid or limit capital gains taxes under certain circumstances.
The "gain" is determined by the price you sold the house for less the expenses from selling the house, any improvements you made and the price you paid for the house. The formula looks roughly like this:
If you file your taxes as an individual, then you are typically allowed up to $250,000 in profit on the sale of your home without paying capital gains tax. If you are filing taxes as a couple still, then the amount typically doubles.
There are other factors to consider. For instance, the $250,000 exemption applies only to profits from the sale of a house that was your principle residence. It's important that you understand exactly which rules apply to your situation and what your potential tax liability is before you make the decision to move forward with a sale, and that you take any tax consequences into account when negotiating an agreement with your spouse.
Your divorce lawyer may be able to advise you on this issue, or may be able to refer you to a tax attorney or real estate lawyer who can answer any questions you have about the tax issues associated with selling a house during or after divorce.
If you need help to figure out what legal rights you have during a divorce, and how to best protect assets in divorce, connect with a local attorney. Just fill out the divorce case review form below to connect today for your initial consultation.