Capital gains tax exemption for residence if recently married

[Raquel D.]

My primary residence is worth almost 3x as much as what I paid for it in 2013.  I'm planning on selling in 2018 for a number of reasons, but the increase is going to leave me with a gain of around $300k.   I'm not married and therefore only $250k of that gain would be exempt from capital gains tax.  It's a good problem to have -- but I'm wondering if I can avoid it entirely.

I've been with my partner for going on 13 years, and we've intended on getting married for a long time, but just haven't really gotten around to it.  (Yes, I realize that sounds like a weak reason as I type it -- but neither of us ever wanted a wedding and being married wouldn't change much for us beyond tax filing status, so it wasn't a high priority on our list.  Going to a county courthouse is kind of like going to the DMV -- we don't want to go unless we absolutely have to.)  In hindsight, I realize taking care of this ages ago would've entirely negated this problem -- but hindsight is 20/20. 

So here's my question:  If we get married now and transfer title to the residence to both of our names, would we need to wait for him to be on title for 2 years in order to get the $500k exemption for a married couple?  If so, are there any exceptions that would shorten the period? Any arguments to be made to the IRS since he's lived here the entire time I have?   Thanks for any input! 

[Vlad K.]

Hi @Raquel D. Congratulations on the increased value of your house. Comparing to the 13 years relationship, the tax applicability is very easy. :)

1. If you get married and file joint return you will be able to exclude full $500k, assuming that your partner has lived in the house for 2 out of 5 years preceding the sale, and neither of you had another exclusion on sale of a house in the previous 2 years. 

2. You DO NOT have to wait two years after getting married to get full exemption, as long as both of you lived in the house for 2 years.

3. You DO NOT have to transfer ownership, you can be the only owner. 

To sum up, you can get married today at noon, and sell the house right after the justice of the peace pronounce you man and wife. :)

Feel free to reach out with any questions. I would be happy to help.