Keep The House Or Sell The House During Or After A Divorce?
Divorce can be a major stressor for many unhappy married couples for a multitude of different reasons. However, one of the biggest reasons divorces can be stressful is because the married couple will now have to undergo what is called “equitable distribution” of all the assets they jointly own. This includes the home they jointly […]
Divorce can be a major stressor for many unhappy married couples for a multitude of different reasons. However, one of the biggest reasons divorces can be stressful is because the married couple will now have to undergo what is called “equitable distribution” of all the assets they jointly own. This includes the home they jointly own. So, in a divorce, the couple must determine if they are going to sell the marital home before the divorce or if one of them is going to retain the marital home as his or her sole property. There are two main factors to consider when deciding whether to sell the marital home during the divorce or to keep it as your own residence: (1) emotional considerations and (2) tax consequences.
In some cases, a decision on whether to keep the marital home in the divorce turns on whether the couple has children. If the couple does have children, then one party may want to keep the home in the divorce so that the children can attend the same schools they did prior to the divorce. Moreover, if certain milestones in their children’s lives occurred in the home, one spouse may want to keep the home for sentimental reasons. Certainly, both are valid reasons for one of the spouses to want to retain the home in the divorce. However, if the couple does not have children, one of the spouses may want to retain the home for other reasons. For instance, if the home was one of the spouse’s childhood home, then they may want to keep the home for sentimental purposes as well.
Moreover, regardless of whether the couple does or does not have children, one reason a spouse may consider retaining the marital home in the divorce is that the house may be the one reprieve from change the spouse will have throughout the divorce process. In other words, while everything in their life is starting to change because of the divorce, the one thing that is not changing is where they will be living. While all of the above considerations are valid reasons for keeping the home in the divorce, one must balance these considerations with the potential tax consequences that come with keeping the home as a single person.
If a spouse is planning on keeping the house in the divorce, he or she must understand the tax consequences associated with retaining the house. In New Jersey, if a married couple decides to sell a marital home, then they are permitted to receive a tax exemption on the capital gains they receive from the sale of up to $500,000. If a single person sells a home, however, he or she is only entitled to an exemption for capital gains earned on the sale of up of $250,000. Any amount above $250,000 is taxable income and the single taxpayer will be responsible to pay taxes on the rest of the proceeds collected from the sale.
Accordingly, if a married couple decides to sell the marital home before the divorce is finalized, they will be able to sell their marital home and retain more of the proceeds to split between them as the $500,000 tax capital gain exemption will still apply. If a spouse decides to keep the house in the divorce and then decides to sell it at a later date, he or she may be liable for taxes to the IRS that he or she cannot necessarily afford.
Regardless of whether the emotional considerations outweigh the tax consequences in your decision to sell or keep the marital home in the divorce or vice versa, it is crucial to understand how both potential decisions may impact you in the future.
Contact a Voorhees Family Law Attorney for a Consultation About Divorce in New Jersey Today
If you are thinking about filing for divorce, or if you have already started the divorce process and are dealing with another matter such as child custody, child support, or division of assets, you need to speak with a qualified attorney. The NJ family law attorneys at the Law Firm of Davis & Mendelson represent clients throughout the state, including Camden, Cherry Hill, Collingswood, and Haddonfield, NJ. We understand how challenging this time can be for you, which is why we will fight hard to protect your interests, and the interests of your loved ones, throughout the legal process. Call us at 866-560-9512 or fill out our confidential contact form to schedule a consultation. We have an office conveniently located at 1200 Laurel Oak Road, Suite 101, Voorhees, NJ 08043.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.