Elder Law Answers
What Will My Capital Gains Tax Be When I Sell My Home?
I am planning on selling my house and buying a smaller and cheaper one. I am married and have been in my home for 40 years...
Read moreWill We Face Capital Gains Tax on Our Son's Home?
- May 1st, 2024
Q
My husband and I have a primary residence in a city in Arizona. My son bought a home in another town in Arizona, and we are named on his deed as co-owners. The bank required it because of his credit. We paid off his loan, and now he pays us monthly payments. He wants to sell his home in approximately 11 years. Do we have to pay capital gains tax on the entire gains of the sale of his home because we are on the deed?
A
It's a bit complicated. Are you and your husband anticipating receiving some of the proceeds, or will it all go to your son? Do you have an agreement on how the proceeds will be divvied up? I think you could argue that the capital gains should follow the money. To the extent you receive funds, a share of the gains should be allocated to you. If it all goes to your son, then none should be allocated to you. With respect to the capital gains allocated to your son, he can exclude the first $250,000 since the house is his primary residence ($500,000 if he is married at the time).
Harry S. Margolis practices elder law, estate, and special needs planning in Boston and Wellesley, Massachusetts. He is the founder of ElderLawAnswers.com and answers consumer questions about estate planning issues here and at AskHarry.info.