Why Timing Matters Here
Married couples filing jointly can typically exclude up to $500,000 in capital gains on the sale of a primary residence, while a single filer's exclusion is generally $250,000. Selling while you're still legally married, versus after the divorce is finalized, can change which exclusion applies to your sale. This is one of the most consequential and most overlooked numbers in a divorce involving a house with real appreciation.
What Can Preserve the Larger Exclusion
Some divorcing couples structure their settlement so the sale closes before the divorce is final, specifically to use the joint exclusion. Others use a provision that allows a spouse who moved out to still count the home as their residence for tax purposes, under certain conditions. Which option fits your situation depends on your decree, your timeline, and your accountant's read on your specific numbers.
It's Easy to Miss This Until It's Too Late
I've seen couples agree to a settlement structure, then only realize the tax consequences after the fact, when there's much less room to adjust. If there's meaningful equity in the home, this is worth raising with your attorney and accountant early in the process, not after a listing date is already set.
Get the Real Estate Side Mapped Out
I can't give you tax advice, but I can help you understand how different sale timelines actually play out logistically, so you and your tax professional have real numbers to work with instead of guesses.
Before you decide when to list, get a clear picture of what timing actually does to your tax exposure. Schedule a free, confidential consultation and I'll walk through the real estate side while you loop in your tax professional.
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Hannah Ohman is a licensed California real estate professional and a neutral resource during your divorce. While she has a legal background, she does not practice law, provide legal or tax advice, or represent either spouse as an attorney, and nothing in this article should be relied upon as legal or tax advice. Please consult a licensed family law attorney or tax professional for guidance specific to your situation.