How do I calculate a house buyout in a divorce?
Determine the home's current market value (often via an appraisal), then subtract the mortgage balance to get the equity. Multiply the equity by the departing spouse's share — 50% in community property states, or the equitable percentage in equitable distribution states. That figure is the buyout. To keep the home, you typically refinance the mortgage plus the buyout amount in your name only.
Do I need to refinance to buy out my spouse's share?
In most cases yes. Refinancing removes your spouse from the mortgage and deed and gives you cash to fund the buyout. You must qualify for the new loan on your income alone. A quitclaim deed transfers title, but it does NOT remove your spouse from the original mortgage — only a refinance or assumption does that.
How is home equity split in a divorce?
In the nine community property states, marital equity is split 50/50. In equitable distribution states, the court divides equity fairly based on factors like each spouse's contributions and financial circumstances. Separate-property contributions (like a pre-marriage down payment) may be credited back to the contributing spouse first.
What are the tax consequences of a house buyout?
Transfers of property between spouses incident to divorce are generally tax-free under IRC §1041. However, the spouse who keeps the home takes on the original cost basis and may owe capital gains tax on a future sale above the $250,000 individual exclusion. Consult a tax professional before finalizing.