We are now looking to sell the house (we're in California, if that changes anything) and due to the situation with the deed we have been asked to sign a Interspousal Grant Deed.=====>>I guess this is legal issue so you need some accurate professional legal help. So, The grant Deed is used to create/ transfer a real property ownership interest between spouses. Your spouse simply may need a Quit Claim Deed transferring interest from herself to both of you.
We are concerned, that since she will be selling the property "on her own" it will affect the capital gains tax if she profits over $250K... ==>>so, the interspousal transfer grant deed, likely granted sole ownership of the house to your
spouse if you sign it and then I guess yes;she
can exclude up to $250k in profit from the sale of a main home or $500k for a married couple as mfj as you know as long as your spouse has owned the home and lived in the home for a minimum of 2 years.i mean In the 5 years prior to the sale of the house, she needs to have lived in the house for at least 24 months in that 5-year period.
However, we're not sure if that would apply if we are married and file jointly. Obviously this is all very new to us, so any insight on this situation would be appreciated======>>>>>in my opinion, you need to check it with your legal Advisor/ real estate attorney;I can tell you; You need to investigate the laws on selling in CA your home state. As for the deed, there is no law that states you must be on the deed. a spouse does not automatically have to be on a deed;some state laws give rights to the spouses of homeowners, even when the non-owner's name is not on the title.aslongas both of you own the home/ real property as joint tenants, you will not receive most favorable capital gains treatment.