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Stephanie B.
Stephanie B., Enrolled Agent
Category: Tax
Satisfied Customers: 556
Experience:  MTax, EA, QuickBooks Proadvisor. Over 15 years accounting and tax experience specializing in individual and small business.
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I own a home that was purchased in 1986 for $144,000 with my

Customer Question

I own a home that was purchased in 1986 for $144,000 with my husband and presently the title is in both our names even though he died in 2004. I can sell now for $439,000. Will I have to pay capital gains tax on the excess over and above the $250,000 exception? Also I am confused as to whether the amount of money in upgrades makes any difference. Since I have spent $300,000 on upgrades and renovation I don't see how I am making a taxable profit. Plus the price of the original loan leaves me in he whole.
Submitted: 5 years ago.
Category: Tax
Expert:  Stephanie B. replied 5 years ago.

Stephanie B. :

Thank you for using Just Answer.


You are entitled to the $250,000 exclusion if you have lived in the home two of the past five years. In addition, you are allowed to add the cost of renovations and upgrades to the original cost of the home. For example, if you gave $144,000 for the home and you add the $300,000 cost of renovation and upgrades for a total of $444,000. If you sell the home for $439,000 gross (not accounting for seller fees) you will have a non deductible loss of $5000. I say non deductible loss because you are not allowed to take a tax deductible loss on a personal asset.

I hope this answers your question. If not, I will do my best to clarify.

I look forward to your reply.

Stephanie

Expert:  Stephanie B. replied 5 years ago.
In addition, you may be entitled to a step-up basis in your husband's share of the house. This is based on the fair market value of the home at the date of your husband's death.

Adding a step-up in basis would increase the original cost of the home, then you would still add the cost of renovations and upgrades to this new basis, which in your situation would just increase your non-deductible loss.

However, I wanted to be sure to give you all the information for your situation.

I look forward to your reply.

Stephanie