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Personal Finance

2 Key Home-Sale Tax Rules for Surviving Spouses

Widows and widowers may be eligible to use the full $500,000 home-sale exclusion and should learn the rules for stepping up the cost basis on their home.

Many widowed clients live in homes they have owned for decades. In spite of the recent real estate crisis, these homes have still appreciated dramatically from their original purchase price. As they prepare to downsize or relocate to a retirement community, many are afraid of the taxes due on the sale of their marital home.

Understanding the rules on the taxation of gain from the sale of a primary residence can help you to project the real tax cost of a sale. The basic steps are to determine if the sale itself qualifies for the exclusion and if the ownership and residency requirements have been met. Note that a mobile home or even a houseboat can all count as a residence.

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