Hey Guys:
So my dad has a home in Austin that my brother and I have been remodeling and will put on the market soon. I had a couple of questions that I thought maybe someone could help with.

The first is, will the reverse mortgage cause any issues at sale? The loan balance is significantly less than what the home will sell for, so I am not too concerned about it but just wanted to see if there was something I might not be aware of.

The second is around proceeds from the sale and taxes, etc. I strongly suspect that after the sale, the net will be somewhere in the $300k range, which we will use to pay for his long term care at a memory facility. The home is in his name, but I have durable power of attorney. Is there anything I can do to shelter any of the proceeds from capital gains taxes? Split proceeds between my brother and I? Just trying to do everything I can to have as much money available to pay for his care as possible.

Any advice is greatly appreciated, thanks in advance!

I saw this online, so it looks like you are exempt from the first $250,000, and you can add improvement costs, etc.? I wonder if we can add that even though we paid for it and not him directly? But if he's only going to get taxed on the amount > $250k that's a bit more palatable. Just trying to squeeze out every $$$ we can for his care. Thanks!

• You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly.
  
• This exemption is only allowable once every two years.
• You can add your cost basis and costs of any improvements that you made to the home to the $250,000 if single or $500,000 if married filing jointly.

I'm not a tax attorney but could you consider the money you payed to renovate a loan to your father. Use the sale gains to pay off the loan which could potentially reduce the capital gains?

Superfreak said:

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I'm not a tax attorney but could you consider the money you payed to renovate a loan to your father. Use the sale gains to pay off the loan which could potentially reduce the capital gains?

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Thanks, that's a great idea, I will see about that, much appreciated. Understand that you're not a tax attorney but at least it's something I can investigate.

I would think you will be fine on taxes.

If your dad was married and both owned the house, the cost basis on the house was stepped up on the first death.

As long as your dad lived in the house 2 yrs out of the last 5, he can write off $250k of gains.

Reading that you can't write off the reverse mortgage loan, but you can write off the reverse mortgage interest that occurs when you pay it off. I know nothing of this or what it would be.

His medical costs can be written off which should be able to help offset some of the leftover gains.

Any costs to repair the house can be added to the cost basis, but those receipts may be hard to find.

About writing off that reverse mortgage interest - I doubt you can. You can only if you used the reverse mortgage to buy a place or fix one up. If you used the reverse mortgage for living expenses, you can't write it off.