Colorado Divorce Decisions blog
Should we sell the house before or after the divorce is final? The Colorado tax answer
The date on the decree can be worth real money when the gain is over $250,000. Here is the rule and a worked example.
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If the gain on the house is under $250,000, timing rarely matters for taxes. If it is more, closing before the decree and filing a joint return for that year keeps the $500,000 exclusion. After the decree, each spouse gets $250,000 on their share. And if one spouse stays under the decree, the IRS counts that as the other’s use, which preserves their $250,000 for a later sale.
A Denver example
Bought 2004 for $280,000, sells for $649,500 with $38,000 of costs: gain about $331,000. Joint return: fully excluded. One spouse selling alone later with the carried-over basis: about $81,000 taxable, roughly $15,800 of federal and Colorado tax.
The two divorce rules in IRS Publication 523
- Your ex’s use of the home under the decree counts as your use.
- If you receive the home in the divorce, your ex’s ownership time counts as yours.
Other reasons the timing matters
- The market between now and the decree.
- Whether the sale needs a stipulation (before) or just the decree (after).
- Who is living there and what showings do to the case.
The full tax page and how to sell during a divorce.
Plain-language education from a Colorado real estate group, not legal, tax or financial advice. Numbers are as of September 2026. Disclaimer.
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Divorce Decisions™: Colorado divorce workshops and education. Real estate services provided by The Kenna Real Estate Group at Keller Williams DTC. Not legal, tax, lending or financial advice.