[USER]

What would you do? I’m selling my house and will net about $290k upon closing.

I’m in Texas, my understanding is that I won’t pay capital gains tax on the first $250k and I can do whatever I want with it, but will have to pay taxes on the additional $40k.

My fiance and I bought a new house and our income is very different.

I make 3x what he makes and I’ve seen people say not to put it in a shared asset which I think is smart so I was going to put it in VTSAX. Does this sound like a solid plan?

We have distributed the bills fairly based on our income.

He and I have both been divorced and we want to tread carefully.

TIA

[Joel]

When you sell your house, you receive the purchase price minus the mortgage balance and any closing costs you owe. This is NOT the same as your capital gain.

Capital gain is the sale price minus the purchase price minus any capital improvements minus any allowable closing costs.

Capital gains are usually much less than the net proceeds from the sale, unless you took out a HEL, HELOC or did a cash out refinance while owning the house.

I suspect you will owe nothing for capital gains taxes…
And yes, VTSAX or VTI is probably a good plan.

That’s where most of the proceeds of the sale of my house in 2022 went.

[Dave]

Sounds like a fairly solid plan.
It’s worth noting that the tax burden of that $40K gain will be relatively minimal (no state income tax, and you’ll almost certainly be in the 15% bracket for long-term capital gains, so you’re going to want to set aside at least $6,000.)

I would be wary of buying a house together while you are still engaged, rather than married — are both of your names on the title and the mortgage?

[Dawn]

Is 290k equal to the sales price, minus selling fees and closing costs, minus improvements, minus some of your buying closing costs?

Or is it just how much you’ll walk away with after closing.

I’m just making sure you understand what’s actually calculated in your cost basis.

[Frank]

Are you selling it in the same year you get married? If so, your exemption is likely 500K, but consult a CPA.

What you really need is a prenuptial agreement.

You cannot “fix” this merely with asset and account selection.

[Sue]

You can also claim any upgrades you made to house to offset taxes

[Rick]

Yes, you should put excess into your personal accounts. You can choose to use the benefits of that account, dividends and capital gains, to benefit your relationship.

I would personally say more than can choose and instead say yes you should.

If you have a great partner, “investing” the growth of your assets in your partnership is very wise.

But to the cap gains part…$40k is fairly easy to cover in the wash of home improvements, selling costs, etc.

Don’t sleep on a little effort here to get this to $0 cap gains.

[Ron]

Good plan. Be sure to get the money into the brokerage acct with you listed as SOLE owner PRIOR to marriage.

You can list him as beneficiary if you want but no joint ownership.

[Jake]

As said by others the actual tax burden on the 40k gain might be lower than you expect.

I don’t know your situation, but this is long term capital gains, it could be 0%, 15%, or 22% of the 40k that will be taxes.

[Author]

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