Selling a House During Divorce
Selling the family home is often the largest financial decision in a divorce. Understanding your options, the tax implications, and how to split proceeds fairly can save both parties significant money and stress.
Options for the Marital Home
- Sell and split proceeds: The most common and cleanest approach
- One spouse buys out the other: Requires refinancing to remove the other's name
- Continue co-owning temporarily: Sometimes used when children are involved
- Rent the property: Co-own as landlords and split income
Tax Considerations
Divorce Advantage
$500K Exclusion
may still apply if both spouses qualify and file jointly in the year of sale
The $500,000 exclusion for married filing jointly is available if the sale occurs in the same tax year as the divorce and both spouses meet the ownership and use tests. After the divorce is finalized, each spouse can claim up to $250,000 individually.
Timing the Sale
Selling before the divorce is finalized can simplify the process and potentially allow the larger $500,000 exclusion. However, court orders may restrict what you can do with the property during proceedings.
Splitting the Proceeds
The net proceeds are typically split according to the divorce agreement. Factors that affect the split include who paid the down payment, who made mortgage payments, and the state's property division laws (community property vs. equitable distribution).
The Bottom Line
A cooperative approach to selling the marital home almost always yields better results than adversarial tactics. Use our calculator to model different scenarios and find the best path forward for both parties.