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Splitting up the home sale exclusion

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. My husband and I are getting a divorce. If we sell our home afterward, can we still claim the home sale exclusion? L.C., Stamford, Conn.

A. Probably, yes. To qualify for the home sale exclusion, you must have owned and used the home as your principal residence for two of the previous five years. If you aren’t divorced by the end of the tax year, you can file a joint return and claim an exclusion of up to $500,000. Either spouse may meet the ownership test, but both must meet the use test. If you file separate returns, the exclusion is limited to $250,000 each.

Tip: Have your attorney work out the details in your divorce agreement.

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