Taxes on Mortgage Buy-out?
Hi Terry,
My ex-boyfriend and I bought a house together in 2019. The mortgage was only in his name and I was sending him monthly payments to cover my half. The deed of the property was in both of our names. We were never married and broke up in early 2022. I bought out my ex-boyfriend from the mortgage and was able to pay the remaining mortgage off in full in the summer of 2022.
Are there any income tax implications to this? Does my ex-boyfriend owe taxes on the amount I paid him to buy him out? Is it considered a sale of a house for him? Is the money considered a gift to him? Or anything else you can think of?
Thank you very much,
Terry Says
I think you need a qualified tax preparer, because a lot depends on the documents you created around this transfer.
If you paid him less than $17,000, it could be considered a gift — and no taxes are owed by either of you.
If it was more than that, and if he booked it as a sale, he can exclude the gains assuming he lived there for two years and the gains were less than $250,000.
But how this was documented impacts YOUR cost basis for the house. And that will matter when you ultimately sell. Assuming you just paid him half the original purchase price, then your cost basis will be the original purchase price. And you can avoid taxes on the first $250,000 of gains.
But all that assumes you re-registered the deed at the time he transferred his half of the house into your name.
It’s important to get this sorted out now, so you have no issues when you eventually sell it.
