Home-Sale Profit Rules for Widows And Widowers
A sale by year-end could double the amount of profit that is tax-free.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter
One of the greatest tax breaks for homeowners -- in addition to the one that allows you to deduct property taxes and mortgage interest -- is the ability to claim tax-free profits on the sale of your principal residence. Individuals can take up to $250,000 of profit tax-free, and married couples filing jointly can get a cool half million when they sell a house that they lived in for at least two out of five years prior to the sale.
A recent change in the law provides a special rule for widows and widowers.
Previously, a surviving spouse could claim the full $500,000 exclusion only if the home was sold in the year that a joint return was filed, which generally is limited to the year the spouse dies. But now a surviving spouse may exclude up to $500,000 of profit from the sale of the principal residence if it occurs within two years of the spouse’s death.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For example, if your husband died in 2007 and you sell the house that the two of you shared by December 31, 2009, you will be able to exclude up to $500,000 of profits from taxes. If you wait until next year or later to sell the house, you will be able to exclude only half of that amount -- up to $250,000 in profits -- from taxes.
Whether rushing a sale by year-end would benefit you depends on a lot of things, particularly on how much profit you expect to reap. And remember this: If your late spouse jointly owned the house with you, at least half of the gain accumulated up to the time of his or her death became tax-free at that time. That increases your tax basis -- the amount from which gain or loss on a sale will be determined -- and thus reduces your profit on any sale.
A recent change in the law provides a special rule for widows and widowers.
Previously, a surviving spouse could claim the full $500,000 exclusion only if the home was sold in the year that a joint return was filed, which generally is limited to the year the spouse dies. But now a surviving spouse may exclude up to $500,000 of profit from the sale of the principal residence if it occurs within two years of the spouse’s death.
For example, if your husband died in 2007 and you sell the house that the two of you shared by December 31, 2009, you will be able to exclude up to $500,000 of profits from taxes. If you wait until next year or later to sell the house, you will be able to exclude only half of that amount -- up to $250,000 in profits -- from taxes.
Whether rushing a sale by year-end would benefit you depends on a lot of things, particularly on how much profit you expect to reap. And remember this: If your late spouse jointly owned the house with you, at least half of the gain accumulated up to the time of his or her death became tax-free at that time. That increases your tax basis -- the amount from which gain or loss on a sale will be determined -- and thus reduces your profit on any sale.
-
-
Fed Raises Interest Rates Yet Again: What the Experts Are Saying
Federal Reserve The Fed's quarter-point rate hike was welcomed by the market and market pros, alike.
By Dan Burrows • Published
-
Stock Market Today: Stocks Swing Higher After Powell Presser
The Fed raised rates by 0.25%, as expected, and Powell promised to "stay the course until the job is done."
By Karee Venema • Published
-
Student Loan Forgiveness Blocked For Now Due to Court Rulings
Biden's student loan debt forgiveness program is on hold until the U.S. Supreme Court can weigh in.
By Kelley R. Taylor • Published
-
529 Plan Contribution Deadlines
Many states have year-end deadlines for making 529 college savings plan contributions.
By Kelley R. Taylor • Last updated
-
CVS Will Pay “Pink Tax” and Drop Prices on Period Products
CVS is taking a stand against the pink tax, tampon tax, and period poverty in twelve states where tampons and other menstrual products are more expensive.
By Kelley R. Taylor • Last updated
-
Tax 2023: Is the Expanded Child Tax Credit Gone for Good?
A power split in Congress for 2023 means key Democratic and Republican tax policies could be stalled.
By Kelley R. Taylor • Last updated
-
HSA Contribution Limits and Other Requirements for 2022 and 2023
health savings accounts If you're covering health care costs with an HSA, contribution limits and other requirements that are adjusted for inflation each year must be satisfied.
By Rocky Mengle • Published
-
Will Hyundai or Kia EVs Qualify for the Electric Vehicle Tax Credit?
The new electric vehicle tax credit has spurred concern that Kia and Hyundai EVs won’t qualify—without some flexibility.
By Kelley R. Taylor • Published
-
Biden's Student Loan Forgiveness: You Can Opt Out if You Want To
Following a student loan debt relief lawsuit, the Department of Education says that borrowers can opt out of President Biden’s student loan forgiveness plan.
By Kelley R. Taylor • Last updated
-
Some States Will Tax Student Loan Forgiveness
taxes You won’t pay federal income taxes on forgiven student loan debt, but there are some states that will or could tax your student loan forgiveness.
By Kelley R. Taylor • Last updated