Ask Terry Questions Capital gains on sale of a house

Capital gains on sale of a house

By Terry Savage on June 24, 2020 | Taxes & Economy

My mother in Ohio has moved to independent living and wants to sell her house (built in 1957). It’s in a very desirable area and will probably sell for over $600,000. It is in her trust. Will she have to pay capital gains on the sale if it’s in the trust?

Terry Says

She can exclude $250,000 of capital gains on the sale of her home,whether titled in a revocable living trust or in her name. (It would be a $500,000 exclusion if married filing jointly, or if joint trustees of the trust.) Be sure to include all documented improvements over the years in the “cost basis” to reduce any remaining taxable gains.

For example, suppose she paid $200,000 for the house, and over the years put in another $100,000 in remodeling costs, new roof, new hot water heater or furnace etc. As long asyou can document those purchases then her “total cost basis” would be $300,000. If she sells for $600,000, she can eliminate $250,000 of the gains, and only pay capital gains on the remaining $50,000.

And by the way, capital gains taxes are likely to rise in a new administration. So you want to sell before the end of this year!



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