Originally Posted by acejjl2
#1;My question is, can she still take the exemption on capital gains for 2016 as we will be required to file as married for our 2016 taxes?
#2;Can we still do this married filing jointly? Filing as married filing separately would end up hitting us much harder than just paying the capital gains.
Thanks in advance for the help!
yes. it's OK if she owned the home for the past 2 years.
during the 2-year period ending on the date of the sale, neither you or your spouse excluded gain from the sale of another home. Under this couple requirement, if either spouse sold a home and used the exclusion within 2 years of the sale of any jointly owned property, the couple can't claim the exclusion. That means if your new spouse sold her house a month before the wedding, then you'll have to wait 2 years after that property's sale date before you can dispose of your shared marital residence totally tax-free.
#2;Correct as said previously; If either spouse does not satisfy all these requirements, the exclusion is figured separately for each spouse as if you were not married. This means you can each qualify for up to a $250k exclusion. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. For joint owners who are not married, up to $250k of gain is tax free for each qualifying owner.
Choosing the right filing status will result in the lowest possible income tax; in general married couples usually file as MFJ. MFJ will give you a bigger refund or less taxes due. When you file separately, your tax rate is higher and you won't be able to claim several credits i.e., EIC or etc But Not will be required to file as MFJ for 2016 return; so married taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status.
Married couples who file jointly are entitled to a $500k exclusion from capital gains so long as either spouse owned the residence and both spouses meet the use test. If an unmarried couple bought a house and lived in it for one and a half years, and then got married, they can use that year and a half towards the two year requirement. This means they only need to live in the house as a married couple for six more months to qualify.