Three main options: one spouse buys out the other's equity, you sell the home and split the proceeds, or you agree on a deferred sale arrangement. The divorce decree must specify the plan. Consult both a family law attorney and a real estate agent to understand the tax, financial, and practical implications of each option.
Your Options for the Home
Buyout: One spouse keeps the home and refinances to remove the other spouse from the mortgage and title. Sell and split: You sell the home, pay off the mortgage and costs, and divide the remaining equity per the decree. Deferred sale: You agree to sell at a later date, often when children reach a certain age. Each option has different financial and tax consequences.
Tax Implications of Divorce and the Home
The capital gains exclusion still applies: each spouse can exclude up to $250,000 of gain (if they meet the 2-of-5-year use test). A spouse who moves out may still qualify if the divorce decree awards the home to the other spouse. Alimony is no longer deductible for post-2018 divorces. Property transfers between spouses incident to divorce are generally tax-free.
Timeline and Practical Guidance
Start talking to professionals early. A family law attorney handles the legal side and the decree. A real estate agent can provide a market analysis to help value the home for the buyout. A mortgage lender can tell the spouse keeping the home whether they qualify to refinance on their own income.