Can You Get Divorced Before Your House Sells?

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Selling your home doesn't have to complicate your divorce.
Selling your home doesn't have to complicate your divorce. (Image: Digital Vision./Digital Vision/Getty Images)

The decision to sell your home during a divorce is not uncommon. However, many people have misconceptions about whether you can sell a home before or during a divorce. Some believe you must sell the home before the divorce goes through, while others prefer to wait until after the divorce. Legally, you can sell your home either before or after a divorce.

Selling Your Home Before a Divorce

Some financial planners and divorce lawyers recommend that you sell your home before getting a divorce. There are many reasons to sell a home before a divorce, but most of them are financial. When you sell a home prior to divorcing, you know exactly how much the home is worth and can evenly divide the assets. When you wait until after a divorce, the settlement can become complicated, and there's a chance that one of the parties may not operate in good faith.

Settle an Acceptable Agreement for the Home

If you decide to divorce before you sell the home, write an agreement for disposing of the home into the divorce settlement. In some cases, one party buys the other spouse's ownership share of the house during the divorce settlement; leaving one party with full ownership and the other party with a financial settlement. If you don't have the assets to do a buyout, you may structure a settlement agreement to say that you and your spouse will split the profit from the home sale once it goes through. Just make sure you have an agreement in writing to dispose of the property.

Tax Implications of Selling and Divorce

When you're getting a divorce, selling a home has tax consequences. If you and your spouse owned the home and lived there for at least two out of the last five years, you are each eligible to exclude up to $250,000 of capital gains for selling your home. If you're married and filing jointly, you can exclude $500,000 of capital gains for a home sale. Decide which tax situation is most advantageous to you and your spouse if you sell, and time the divorce accordingly.

Keeping the Home for Years and then Selling

If you don't decide to sell a home during a divorce, you or your spouse may inhabit the home or keep it for several years after a divorce. If one party is going to retain ownership in the home, you should include the terms in the divorce settlement; either through a buy-out, or an agreement to split the income when the home does sell. For tax purposes, if you keep a home that you owned jointly with your spouse, and then sell it years later, you can still only claim an exclusion of $250,000 on your capital gains for selling the home.

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