Tax Q&A;: Divorce & Mortgage
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This daily tax season column publishes tax questions from readers answered by local members of the California Society of Certified Public Accountants.
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For the record:
12:00 a.m. March 26, 1999 For the Record
Los Angeles Times Friday March 26, 1999 Home Edition Business Part C Page 3 Financial Desk 2 inches; 62 words Type of Material: Correction
Tax Q&A--The; March 15 Tax Q&A; noted that taxpayers can qualify for a partial exclusion of their profit from a home sale if they lived there for less than the required two of the previous five years. It should have added, however, that the Internal Revenue Service allows these partial, prorated exclusions only under certain conditions, such as a job transfer, illness or other “unforeseen circumstances” that are still to be specified by the IRS.
Q. My wife and I divorced. I moved out, although I pay the mortgage on our home, where she still lives with our children. Can I deduct the mortgage interest? When we sell the home in a few years, will I be able to qualify for the home-sale exclusion?
A. The mortgage interest you pay should come under the IRS’ qualified housing interest rules, which means that it would be deductible. You might want to consult with a CPA or other qualified tax preparer for details.
Whether you qualify for the home-sale exclusion will depend on when the house is sold and how long you lived there. If you lived in the home as your principal residence for two of the five years prior to the sale, then up to $250,000 of your home sale profit will be tax-free. If you lived in the home for less than two years, your exclusion would be proportionate to the number of months you lived there. Say, for example, you lived there for 12 months out of the 60 months before the sale. You would have lived there for half of the minimum time required for the full exclusion and would therefore be allowed $125,000 of tax-free profit.
--Randy Lawrence, CPA
Century City
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For information on taxes and to see other questions and answers in this series. go to the Times’ Web site, http://cache.nohib.com./taxes . To find a CPA, visit the California Society of CPAs at htt://www.calcpa.org
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