Dear Liz: I own a house with my longtime boyfriend. If one of us dies, how does the capital gains step-up affect the other?
Answer: The deceased partner’s share of the home will get a new basis for tax purposes. The survivor’s share will not.
Tax basis helps determine how much of a capital gains tax bill you might face when you sell a home or any other asset that gained value over time. Your basis is generally what you paid for the home, plus qualifying improvements.
Inherited assets typically get a step-up in tax basis to their current market value, which means that no one has to pay taxes on the appreciation that occurred during the original owner’s lifetime.
If you were married and living in a community property state such as California, then the entire house could get stepped up to the current market value when the first spouse dies. This is known as the double step up. But this applies only to married couples in community property states. Unmarried couples in community property states and couples in other states don’t get this benefit.
Dear Liz: I have retired early. I can keep my employer health insurance, thanks to COBRA, until I’m 64 years and 9 months. Do you have any suggestions on how to bridge that 3-month healthcare gap while waiting for Medicare? I am relatively healthy, but things happen.
Answer: You shouldn’t be without health insurance for a single day, if you can possibly avoid it. Fortunately, the Affordable Care Act exchange can help you bridge the gap.
Once you get the notice from your employer’s health insurer that your COBRA coverage is ending, you can start your application at HealthCare.gov.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
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Source: Liz Weston: Home’s step-up tax basis doesn’t happen if owners aren’t married
