|
Question:
My wife and I are elderly. We have owned and lived in
our home 38 years. It is now worth more than $500,000.
We know if we sell, we can claim that $500,000
exemption you often discuss. However suppose one of us dies
before the home is sold. Would the surviving spouse lose the
$500,000 exemption? Is there a time limit after the death of a
spouse where the survivor can still claim the $500,000
exemption?
Answer:
The $500,000 married filing
jointly principal residence sale tax exemption of Internal
Revenue Code 121 is available until the end of the tax year when
a homeowner spouse dies.
After that tax year, the exemption reverts to $250,000,
which is available to single persons who owned and occupied
their principal residence at least two of the five years before
its sale.
This presumes the deceased spouse left his/her half of
the home to the surviving spouse, and then the surviving spouse
received a new stepped-up basis to market value on the date of
the deceased spouse’s death. If the home is in a community
property state, the surviving spouse receives a 100 percent
stepped-up basis.
But in other states, only 50 percent of the home’s
market value is stepped up when one spouse dies and leaves
his/her half to the survivor. For full details, please contact
your tax adviser.
Contact your Tax Professional for
more information. |
