A family friend, Sally, had been single for most of her adult life…that is until meeting Tom. Sally was passionate about her career and often found herself uninterested in exerting energy into blind dates or the online dating scene that seems to be so prevalent this day and age. She was more traditional. But, when she met Tom at her local grocer, she fell head over heels and there was no stopping their relationship from growing and moving to the next level! They were engaged in just a few months and found themselves in the thralls of wedding shenanigans and planning for their new future together. Being an independent career woman, Sally has owned multiple homes over the course of her life. At the time she had met Tom, Sally was living in a beach-style cottage in Solana Beach. She enjoyed six years in the property and loved every quirk and nook featured in the cottage. She had never dreamed of selling the house, but now that she was about to be married to Tom (who also owned a home), the question presented itself: Should I sell my house when I get married? If Tom and I both own homes before the marriage, can we both sell and avoid capital gains tax? There is a lot to consider when getting married and combining assets…but you do have options.
A Married Couple with Two Homes, What to Consider:
- Sell one of the homes and live in the second together
- Sell both homes and buy a new house together
- Rent out one of the homes and live in the second
There are many factors to consider when you get married and you and your spouse both own homes. Does one of the homes offer more space for your new family to grow? Does one home have more equity and better rental potential? Do you want to start fresh and purchase a home together that you both can put your stamp on? If you’re anything like Sally, you are probably going to have a tough decision to make. When you own a house that you bought on your own and have made “home” in, of course you will be attached. Sometimes some folks are so attached that they won’t budge in moving or selling their home. It’s understandable that one or both of you may be passionate about your current living situation and nervous about changing it. But, now that you are getting married, you have to think about how owning both homes may affect your future together.
What are the tax implications of selling when you get married?
First, both properties owned by each of you separately must have been claimed as your primary residence. Is this the case? Good. Now, how quickly are you willing to sell? For the taxation years before the marriage and even including the year of the marriage, both parties would be able to claim their home as their primary residence. But, the taxation years after the year of marriage, only one property could be claimed as the primary residence for their now “family unit.” Why does this matter? Well, if the home is not considered your primary residence, that you won’t qualify for any exemptions on the taxation of your home sale profits. So, if you want to save yourselves from property gains tax, you can absolutely do so…but you would need to sell before the end of the first year in marriage.
Is there anything else I should think about when selling?
Consider the current market conditions. Forget about capital gains tax, is now really a good time to sell? If the market is flat and you won’t benefit much from selling, then don’t do it. But, if the market is hot, don’t continue making payments and instead, make a profit. Ultimately, you need not forget that you should be benefiting from the sale of your house…and if you aren’t, maybe you should hold off. Another option, if the market isn’t conducive for selling, is to rent one of the homes out. You will be subject to taxes down the road when you do decide to sell, but at that point, the profit gain may still be worth it.
Sell Your House & Move into A New Home with Your Spouse
If you’re ready to part with your home and move in with your spouse, now that you’re married, we can simplify the process for you. We were able to help Sally by purchasing her Solana Beach cottage on her time-frame, and with less hassle. She scheduled the close of escrow to be a couple of months after their wedding and honeymoon (when things had settled), and was able to avoid capital gains tax by selling while it was still her primary residence. The best part is, aside from being sheltered from CGT, she also didn’t have to pay any commissions or closing fees. She netted everything from the sale of her home. Well, her and Tom did (what’s hers is his and his is hers now, right?). If you’re looking to sell your home and finally move into a new home with your spouse, we can make the process incredibly easy for you. Just pick up the phone and call us at 760-566-7716. Also, congrats on the marriage!!Views: 30