25 Sep We bought a house and broke up. What happens with taxes when I sell?

Q. My partner and I bought a home two years ago. This summer we separated and I moved out. We agreed he would pay me the deposit money I originally put in as well as the equity we have gained over the last two years. Then he would refinance in his name only. Will I owe any taxes for the equity dollars I got from him?
— Planning

A. Essentially, you will be selling half of your home to your partner.

Generally, capital gains tax is owed on the difference between the sales price and the total cost of the home including improvements and all closing costs, said Gail Rosen, a Martinsville-based certified public accountant.

“There is a tax break that allows you to exclude up to $250,000 of the gain from the sale if you owned and used this home as your residence for at least two out of the five years before the sale,” Rosen said.

If you fail to meet the two-year ownership and use test, a reduced exclusion is available if the sale occurred because of unforeseen circumstances.

“Unforeseen circumstances include divorce or legal separation,” she said.

But it’s unclear whether you were married at the time of your separation. Speak to a tax professional who knows your entire situation before you make a move.

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This story was originally published on Sept. 25, 2020.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.