Q: Do I have to reinvest money from the sale of my house after divorce into another house?
A:
The requirement to reinvest proceeds from selling your house after divorce depends on your divorce agreement and local tax laws. If there's no specific clause in your divorce settlement requiring reinvestment, you generally have freedom to use the money as you choose.
From a tax perspective, if this was your primary residence and you meet ownership and use tests, you might qualify for capital gains tax exclusion of up to $250,000 as a single person. This means you could potentially keep these proceeds without facing immediate tax consequences, regardless of whether you buy another home.
However, your unique situation may have additional factors to consider. Your divorce decree might include specific requirements about handling housing proceeds, or you may have other financial obligations that could influence this decision. It's worth reviewing your divorce agreement carefully and consulting with both a tax professional and legal advisor to understand your specific obligations and options.
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