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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55285
Experience:  29 years of experience as a tax, real estate, and business attorney.
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I own my house in Cupertino, Ca 94015 and have lived in it

Customer Question

I own my house in Cupertino, Ca 94015 and have lived in it with my kids since 1997. Last month I added my daughters name to the title. She is 21 years old.

I have 600 k equity in the property. When I sell the property, what are my tax obligations?
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good morning. Your home is your primary when you sell your home, you will be entitled to a $250,000 exclusion from capital gains from the sale of your primary residence. Your equity in the house is not relevant in determining what if any gain you have on the sale. Since you and your daughter each own 1/2 of the house, each of you have a basis in the house equal to 1/2 of your original purchase price plus 1/2 of the cost of any improvements you made. So, when the house is sold, the gain recognized by each of you will be 1/2 of the sales price (less closing costs) less your basis.



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Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55285
Experience: 29 years of experience as a tax, real estate, and business attorney.
Richard and other Tax Specialists are ready to help you
Customer: replied 6 years ago.
Does my daughter also get a $250 K exclusion from capital gains on the sale of our Primary Residence . She has lived in the house since 1997 but has been on the Title for one month only?

Expert:  Richard replied 6 years ago.

I will opt out and let another tax expert address this for you.

Customer: replied 6 years ago.
Awaiting your reply
Expert:  DanielleCPA replied 6 years ago.

Both you and your daughter each would be able to exclude up to $250K in gain, provided that each of you meet the IRS's ownership and use tests. Note that if you meet the criteria and your daughter doesn't, you can still exclude 250K in gain, she just would not be able to.


Both tests apply to the 5 year period prior the sale:


1) Owned the home for at least 2 years (ownership test)

2) Lived in the home for at least 2 years (use test)


So, at the present time, you meet both tests and would be able to exclude $250K in gain. Your daughter currently only meets the use test since she has only been on the title for a month.


In the event you sale the home before your daughter qualifies for the ownership test, her portion of the gain would be a capital gain (long-term if owned more than a year). Short-term gains would be taxed at her regular income tax rate, but long-term gains are currently taxed at a rate of 15% if in the 25% tax bracket or higher or 0% if in the 15% tax bracket or lower.

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