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Calculating widow’s home-sale exclusion

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in Small Business Tax

Q: My husband passed away last year. Now, I'm preparing to sell the house we've owned for 25 years. Can I still shelter $500,000 of the home-sale gain from taxes? I know that $500,000 is the joint-filers amount, but I think I read that I would still qualify? No name, Springfield, Ohio

A: Unfortunately, it's too late. To claim the $500,000 home-sale gain exclusion for married couples, you must file a joint tax return for the year of the sale. You can file a joint return for the year a spouse dies (no matter when during the year the death occurred), but you can't file joint returns for subsequent years. So, you'd be limited to the unmarried exclusion rate of $250,000. However, the basis of your deceased husband's share of the home is stepped up to fair market value as of the date of his death. So, your gain may be much smaller than you think, perhaps low enough that you could shelter the entire gain with your $250,000 exclusion.

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