This tax tip explains how a divorce could generate a capital gains tax, as well as legislative changes that have made this less likely. Learn how to compute your home's basis and record any changes that occur. An accompanying tax tip explains how divorce may impose changes in your filing status and eligibility for the child and dependent care tax credit. So, your spouse packed up bags and left. Besides the emotional upheaval, you also may need to prepare for additional work on your tax return.
Couples often sell their home after dissolving the marriage.
The loss of a tax deduction and a big tax on the sale may be the result. But there is a potential drawback for the spouse who keeps the house. If you bought or built your home, the amount you paid for it determines your basis . This includes most settlement or closing costs you paid when you bought it and any debt you assumed. If you built your home, your basis includes the settlement or closing costs of both acquiring your lot and securing your mortgage.