New Visitors Privacy Policy Sponsorship Contact Us Media
Baby Boomers Family Green Home and Auto In Critical Condition Just Starting Out Lifestyle Money
-advertisement -
News & Advice Compare Rates Calculators
Rate Alerts  |  Glossary  |  Help
Mortgage Home
Auto CDs &
Retirement Checking &
Taxes Personal

Tax Talk with George Saenz

Ask the tax adviser

Taxes on a home sale

Dear Tax Talk:
My girlfriend and I purchased a home, and we have broken up. She is buying me out for $12,500. Is there anything I can do so I don't have to claim that money as income and pay taxes on it?

Dear Joe:
Although you lost your home and your girl, you probably won't lose your money to the Internal Revenue Service.

While a married couple definitely would not pay tax on a property split such as this, you were not married so you have to look at the rules relating to home sales. If you lived in and owned the home for at least two of the last five years, you won't have to pay tax as you can claim the exclusion that applies to the sale of your home. That is, an individual who meets this time frame does not have to pay tax on up to $250,000 in gain from the sale of a home.

- advertisement -

Gain in your case would be measured by not only the amount of cash you receive, but also by the amount of debt that you're relieved of. For example, if you're receiving $12,500, plus being released from your half of, say a $100,000 mortgage, your selling price is actually $62,500. To determine your gain, you would figure how much you paid for the house, including the mortgage. For example, if you jointly paid $10,000 down and took out a mortgage for $110,000, your cost would be $60,000, thereby giving you a gain of $2,500. Since the gain is less than the exclusion, you don't owe any tax.

If you don't meet the time test, then you would need to report the gain on the sale of the property to your ex.

-- Posted: April 2, 2002

top of page
See Also
Capital gains exclusion on home sales
Tax Basics: Owning a home

Paid points? How to deduct them

More tax adviser stories

Print   E-mail

Compare Rates
30 yr fixed mtg 4.45%
48 month new car loan 3.77%
1 yr CD 0.89%
Rates may include points

Mortgage calculator
See your FICO Score Range -- Free
How much money can you save in your 401(k) plan?
Which is better -- a rebate or special dealer financing?

Tax Basics
Knowing how to file can save you money.
Filling out the W-4 form
What is my tax rate?
How to itemize deductions
Tax credits can lower bill
Death and taxes
Tax record-keeping

Income tax rates  
Tax forms  
State taxes  
Tax basics

- advertisement -

- advertisement -

About Bankrate | Privacy Policy/Your California Privacy Rights | Online Media Kit | Partnerships | Investor Relations | Press Room | Contact Us | Sitemap
NYSE: RATE | RSS Feeds |

* Mortgage rate may include points. See rate tables for details. Click here.
* To see the definition of overnight averages click here. ®, Copyright © 2016 Bankrate, Inc., All Rights Reserved, Terms of Use.