What should I do if my parent's home is in mine and my sister's name and my parents want to sell it, but my sister and I do not want to receive the capital gains tax?
My parent's home in Florida is in mine and my sister's name. It was purchased in 1984 for $122,500. My parents want to sell the house for about $625,000. My sister and I do not want the capital gains.
I currently live in their home with my two children, but just purchased my first home this pay May. I'm divorced and my income is $35,000. My sister is married and owns and lives in her own home. If it impacts me less because it is my current home, should my sister should do a quit claim deed? Ideally, we want my parents to receive the capital gains. If my sister and I do have to receive the capital gains, how can we expect this to impact us financially? Should we transfer the name on the house to their name so that they will get the capital gains?
If your parents owned and lived in their home for two of the five prior years, it might make sense for you to transfer the house to them and then have them sell it. It's possible they might owe little to no tax on the sale. However, the tax rules on selling a house are complicated. Seek guidance from a qualified professional.
Who gets the proceeds of the sale? If it all goes to your parents and you and your sister get stuck with the capital gains, that is a bad deal. If the capital gains is paid from the proceeds, and the remainder goes to your parents, it is a wash for you and your sister. In that event, you should treat any money you receive as a windfall gain. Your parents earned it and if they share proceeds after capital gains you should thank them for sharing with you.