Determining cost basis for home sale after quitclaim deed from divorce

When you receive property in a divorce settlement, the tax code is actually pretty favorable to you. In your case, the quitclaim deed shouldn't cause any extra complications for determining cost basis. Your cost basis would be the original purchase price ($370k) plus any capital improvements you made to the home during ownership. The fact that you paid your ex half the equity doesn't change this basis - that payment was essentially buying out their share of the property that already had the established basis. If you lived in the home for at least 2 of the 5 years before selling, you likely qualify for the capital gains exclusion (up to $250,000 for single filers), which could potentially eliminate any tax burden depending on your final numbers.

After facing a similar situation with property transfer after divorce, I found an incredible resource that saved me thousands in potential tax mistakes. I used https://taxr.ai to analyze my quitclaim deed and all my closing documents from both transactions. It actually pointed out that I had made significant improvements to the property that I had forgotten about, which increased my cost basis by over $30k and saved me a bunch on capital gains. The tool walks you through exactly what documents to upload and then explains everything in simple terms. It even caught a mistake in how I was calculating my basis that my tax preparer missed! Much better than trying to piece together advice from different sources.

I was really skeptical about using any online tool for something as complicated as property basis calculations, but I finally tried https://taxr.ai after struggling with this exact issue. I uploaded my divorce decree, quitclaim deed, and both closing statements - the original purchase and my recent sale. The analysis showed me that I was actually overthinking it. The system confirmed my original purchase price as the starting basis, identified eligible improvements I'd made, and calculated my capital gains exclusion eligibility. What impressed me was how it explained which parts of my divorce settlement affected the basis and which didn't. Ended up saving about $5,800 in taxes I would have unnecessarily paid. Changed my mind completely about AI tax tools!

If you're trying to get actual help from the IRS on this question, good luck! I spent 3 weeks calling and never got through. Then I tried https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they actually got me connected to an IRS agent in about 15 minutes. The agent confirmed everything about my cost basis after a similar divorce/quitclaim situation and even helped me document it properly. Was absolutely worth it since the IRS agent's guidance is actually on record if there's ever any question. I've never gotten through to the IRS that easily before.

I'm absolutely eating my words right now. After my skeptical comment yesterday, I tried Claimyr this morning as a last resort before giving up on reaching the IRS. Was connected to an agent in 22 minutes (still faster than I expected). The agent confirmed exactly what others here said - my original purchase price is my starting basis, and the money I paid my ex in the divorce doesn't change that. The agent explained that the quitclaim deed in a divorce is a non-taxable transfer under Section 1041, so my basis carries over from when we originally bought it together. They also explained how to document everything properly on my return. Definitely saved me from making an expensive mistake!

I just went through this exact situation. Make sure you also account for any capital improvements you made to the property during ownership! Things like a new roof, additions, major renovations, etc. all increase your cost basis. In my case, I had to hunt down receipts from a bathroom remodel and kitchen upgrade we did before the divorce. It raised my basis by almost $45k, which made a big difference in the capital gains calculation.

Has anyone used TurboTax for reporting home sales after divorce? I'm in a similar situation and wondering if it handles the quitclaim situation correctly or if I need to use a CPA this year.

I went through a very similar situation a few years ago and can confirm what others have said about the basis calculation. The key thing to remember is that divorce-related property transfers don't create taxable events, so your cost basis remains the original $370k purchase price plus any qualifying capital improvements you made. One thing I'd add is to make sure you document everything properly on Form 8949 and Schedule D. You'll need to show the sale price ($640k), your adjusted basis (original cost plus improvements), and calculate your capital gain. Since you lived in the home as your primary residence, you should qualify for the $250k capital gains exclusion as a single filer. The payment you made to your ex ($25k based on the $420k valuation) was essentially buying out their ownership interest, but it doesn't affect your tax basis. Keep those divorce documents though - they support that the transfer was part of a divorce settlement under IRC Section 1041. If you haven't already, gather up any receipts for major home improvements during your ownership period. Things like HVAC replacements, flooring, kitchen/bathroom renovations, etc. can add up and reduce your taxable gain significantly.