Many Alabama residents who are filing to end their marriages this year or in the coming year are homeowners. This may be one of the most substantial assets that they have. It may also be something both parties wish to hang onto and continue living in during or after the divorce, at least for right now. When they do eventually sell, which party will reap the tax benefits that will allow them the ability to maintain the profits on the sale?
To figure this out, one must look at the current tax laws regarding the sale of one's primary residence. As of Oct. 2018, the current laws state that a couple may exclude up to $500,000 in profits from their jointly filed tax return. A single person may only exclude up to $250,000.
There is a catch here. In order to qualify for this exclusion, a person must meet a residency requirement. He or she must have lived in the home for two of the last five years. That may seem a simple requirement to meet if a divorced or divorcing couple agrees to continue living in the home together, but feelings change and one party may move out. If that happens, one would be wise not to wait to sell the home if he or she wishes to reap this tax benefit.
In the beginning, there are a lot of unknowns in divorce. What everyone who is going through or preparing for the process wants is to walk away in a decent financial position. When it comes to selling the marital home and maintaining the profit from the sale, Alabama residents can take the steps necessary to ensure that they sell in the proper time frame, which can help their economic state. A family law attorney may be able to provide more information about the best way to handle this asset.