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emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3126
Experience:  IRS licensed Enrolled Agent and tax instructor
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I am asking about the $250k deduction,when you sell your

Customer Question

I am asking about the $250k deduction,when you sell your home. My parent's have lived in their home for over 20 years. My mom died 5 years ago. Now my Dad wants to sell the home and buy a lower priced smaller home.
I know if the did this transaction before my Mom died we cold adjust the cost basis by 500k. What about now? Do we loose her 250k deduction.
Submitted: 1 year ago.
Category: Tax
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

If somebody sell his primary residence with a profit and meet the ownership and residency test, he can exclude up to 250K of capital gains. A couple can exclude up to 500K (250 each) if they file joint return. When one of the spouses dies, the other spouse can use the full 500K exclusion for the next 2 years. After that he can only exclude 250K.

Expert:  emc011075 replied 1 year ago.

250K is not a deduction, it reduces your capital gains from the sale but not bellow 0. If, for example, your dad sales the house with 200K gain, he can exclude the entire gain but cannot use the remaining 50K to reduce his other income. Also the exclusion applies to the gain, not to the cost basis.

Expert:  emc011075 replied 1 year ago.

Any questions? Is there anything else I can help you wit today?

Expert:  emc011075 replied 1 year ago.

Vince, I see you offline now. So if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.