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Using The Exclusion |
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Dear Edith, We have put the deed to our house in our son’s name. We have lifetime use. He does not live with us. If for some reason we decide to sell what happens with the tax exemption? Would we be able to still get it? Do we put the deed back in our names? Before selling? |
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As your letter didn’t include a return envelope or address, I’ll just hope you’re reading the column this week. Not that you’d miss much anyhow, because the answer is a firm “I don’t know.”
It’s not clear what is meant, legally, by the “lifetime use” you mention. You may still be the owners. That would depend on the wording of the deed you signed naming your son. Your own lawyer can tell you for sure.
If you are lifetime owners, you can use the capital gains exclusion when you sell your long-time home. For a married couple filing jointly, that’s up to $500,000 profit free of federal income tax.
If, on the other hand, your son is now the owner, he would be the one to sell and he’d owe tax on the gain, figured from your cost basis. Or, if you took the house back, you could qualify for the homesellers tax break after two years had passed. |
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Edith
Originally published on November 6, 2006 |
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