A Married Filing Joint couple can sell their home and not pay tax on $500,000 of GAIN if they’s lived in the home 3 out of the last 5 years. There is no requirement to invest in a home of equal or greater value.
But, if one spouse dies and the home is then sold after the death, can you still qualify? The answer is YES.
You can still qualify IF you are unmarried at the time of the sale and the sale occurs within 2 years after the date of death. The time, use and frequency requirements still have to be met prior to death.
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