How would capital gains taxes work for my daughter and I when we sell a jointly owned property we’ve held for a little over a year?

by Mark B. Zinman, CPA | May 31, 2018
askacpaicon

My daughter and I bought a house in Pennsylvania. She was going to move here, but she changed her mind and still lives in New York. She never became a resident of Pennsylvania. My primary residence is at a different location in Pennsylvania. We want to sell the house, which we have owned for a year and a month. How will capital gains work? Is it split between the two of us? Can I write off the expenses necessary to get the house running as well as the real estate fees and closing costs?

The gain or loss on the home will be calculated by taking the gross proceeds of the sale, minus any closing costs, including transfer taxes and other fees, minus the original purchase price, plus any of the original closing costs and any improvements made to the home during ownership. That gain or loss will be split between the two of you, each of you picking up 50 percent of the gain or the loss on your own return.
  
You cannot deduct the operating costs of the home, but the real estate taxes, split 50-50, can be claimed as itemized deductions on your return in the year in which they are paid, assuming that itemizing will provide a larger deduction than the standard deduction.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Mark B. Zinman, CPA, is a managing partner with Zinman & Company in Southampton, Pa.

Disclaimer
The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.

Search