Home New mexico tax How much tax will my mother owe on the sale of her house?

How much tax will my mother owe on the sale of her house?


Q. My mother is selling her primary residence in New Jersey after owning it for 60 years. She owned it jointly with my father, who died in 1998. Does she use the 1998 estimated fair market value for half of the house and the 1961 purchase cost for the other half, as a basis for the price – more home improvements since 1998 – when does she file taxes? What happens with the $ 250,000 exemption?

– Help

A. Your mother has tax strategies to use when selling the house.

When the homeowner dies, the tax base of the property – the amount from which gain or loss is determined at the time of sale – is “increased” until the date of death.

When a married couple owns a home jointly, half of the base is increased to the value on the date of the death of the first spouse, said Matthew DeFelice, a certified financial planner at US Financial Services in Fairfield.

Note that in community-owned states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin – the entire base is reinforced, he said.

DeFelice gave an example of how this works in a non-community owned state like New Jersey.

Suppose your parents originally bought the house for $ 100,000. Then say that the house was worth $ 300,000 in 1998, when your father passed away. The initial tax base of $ 100,000 would be increased to $ 200,000 – $ 50,000 (your mother’s share of the original $ 100,000) plus $ 150,000, which is half the value of the house when your father died. Add to that all home renovations been doing since 1998 and you have your mother’s new tax base.

“Single taxpayers will receive an amount of $ 250,000 exclusion of capital gains on the sale of a principal home, so your mom would only pay tax on earnings over $ 250,000 above her adjusted tax base, ”DeFelice said.

Email your questions to [email protected].

Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.com‘s weekly electronic newsletter.


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