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What It Costs to Keep Your Marital Home During DivorceMany divorcees prioritize owning their marital home as part of their divorce agreement. There are advantages beyond an emotional attachment to your house. You may have invested money into making the home that you want. Finding a new home will take time and be costly. There is stability in continuing to live in the same home – for yourself and your children. However, it can be expensive to keep your house in your divorce agreement. Your spouse is a co-owner of the house, and you will need to buy them out in order to be the sole owner.

Assessments and Equity

Before you can negotiate what you will pay your spouse for the home, you first need to assess its value. How you determine this may depend on whether you are still paying off a mortgage on the house or you own it outright. You need a valuation of the house in both situations, including:

  • A property value assessment;
  • The estimated market value; and
  • The property’s condition and cost of repairs.

If you have a mortgage, you will need to determine your equity in the home by subtracting what you owe on the mortgage from the house’s value. You will pay your spouse their share of the home equity in exchange for keeping the home. Your spouse may present a different valuation of your house, based on their own assessment. If you cannot agree on the house’s value, you will need to take the issue to a court, which will choose the more accurate assessment value.

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Can a Divorce Court Order You To Sell Your Home?Deciding what to do with your marital home is one of the most important decisions you will make during your divorce. Will one of you keep the home or will you sell it and divide the proceeds? What is your home’s value? What properties will the other spouse receive if one of you keeps the home? Your divorce negotiations may stall if you cannot come to an agreement on answering these questions, forcing you to take the matter to trial. Among its options, the court can order you to sell your marital home if it decides that a sale is the only way to equitably divide the property.

Recent Case

In the Illinois case of In re Marriage of Hamilton, the wife in a divorce appealed a lower court decision that forced her to sell her marital home and rental home. The lower court ordered the sale of the homes because neither party presented their actual value. Without that information, selling the homes was the only way for the court to ensure that their value was divided equitably. The former wife cited four reasons why she believed the court erred in this decision:

  • Her former husband had testified to the estimated value of the homes;
  • She had presented tax assessment notices for the properties;
  • The marital home had sentimental value because it had belonged to her family for 90 years; and
  • Remaining in the marital home would have been in the best interest of their daughter.

The appellate court rejected these arguments and upheld the sale. Property valuations need to be current and based on proven facts. The husband did not cite how he reached the estimated values of the homes. The tax assessments were three years old and likely did not include inspections of the homes’ conditions. The sentimental value of the home can be part of a court’s decision but does not prevent it from ordering a sale if that is believed to be the best solution.

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Continuing to Live with Your Ex After DivorceLeaving your marital home after your divorce can be difficult for both personal and financial reasons. Personally, you may no longer be living with your children and will see them less often. Financially, you will need to pay for a new home after previously investing in your marital home. If you think it would be easier to continue to live in your marital home with your former spouse, understand that there is a precedent for this living arrangement. However, you will need to settle legal issues and figure out how you can live separately within the same home.

How It Works

Divorcees who stay in the same home choose their own living areas where they can have privacy from each other. They can create a schedule for when they will use common areas, such as the kitchen. As part of the divorce agreement, they can clarify who is responsible for:

  • Upkeep of the home;
  • Purchasing food;
  • Paying bills; and
  • Deciding on changes to the home.

If they have children in the home, they will need a parenting agreement to determine when each parent will be responsible for the children. The schedule may look similar to one that the parents would have created if they were living separately.

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Limited Tax Deductions May Make Keeping Home CostlierThe elimination of the alimony tax deduction has rightfully received the most attention amongst the recent changes to the federal tax laws. Not being able to deduct your spousal maintenance payments from your federal taxes is changing how divorcees negotiate their maintenance. However, changes to tax deductions related to real estate could affect whether you want to keep a home or other real property after a divorce. People in high-asset divorces may have fewer tax deductions available to them.

Tax Deductions

One of the goals of the federal tax reform law passed in 2017 was to simplify the tax code. The standard deduction for a single filer increased from $6,000 to $12,000, but many other deductions were reduced or eliminated, including:

  • Capping deductions for state and local income and property taxes at $10,000 when filing as a single person or a married couple filing jointly, or at $5,000 for a married person filing separately;
  • Eliminating deductions for home equity loan interest unless the loan was used to pay for improvements towards a primary or secondary home;
  • Reducing the mortgage interest tax deduction from $1 million to $750,000 if the mortgage was obtained after Dec. 15, 2017; and
  • Eliminating deductions for foreign real estate taxes.

Some of the people who stand to lose the most from the tax deduction changes are those who own multiple real properties and those who live in areas with high local income and property taxes. Even though the standard deduction has doubled, people in a high-asset divorce may have been able to save more money on taxes with the previous deductions intact.

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Reducing Capital Gains Tax When Selling Marital HomeThe marital home – or more specifically, the value of the marital home – can be a hotly debated subject when dividing properties in a divorce. Only one spouse can keep the home, and the other spouse will need fair compensation in money or assets. Some spouses instead choose to sell their marital home and split the revenue from the sale. Each spouse can receive a substantial payout from the sale to go towards his or her post-divorce life. However, lucrative sales will incur the capital gains tax. The timing in which divorcing spouses sell their marital home can reduce their tax obligation.

Reasons to Sell

A home is often the most valuable property in a marriage, in both monetary and personal terms. Spouses may have an emotional attachment to the home, especially if they have children. However, selling the home is the most practical option in some divorces:

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