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Donating a house as part of a divorce settlement
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Donating a House as Part of a Divorce Settlement
In a divorce, the family home is often the hardest asset to divide: neither spouse wants to keep it, a sale means months of coordination, and every month adds another mortgage or tax payment to split. When both spouses agree, donating the house to Real Estate with Causes can take it off the table. We work with both parties and both attorneys, and nothing is signed until the settlement allows it.
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Both owners have to agree
If both spouses are on the title, both have to sign the deed. A donation works best when it is written into the settlement agreement, so the court and both attorneys have approved it before the deed is signed.
If one spouse has already been awarded the house, that spouse can donate it alone once title has been transferred to them.
How the deduction is divided
Each owner can generally deduct their share of the gift, based on their ownership interest and the appraised value. When the donation happens relative to the divorce matters, because filing status and ownership change on the date the divorce is final.
If the house still has a mortgage, the gift becomes a bargain sale, with gain on the debt portion. Both attorneys and both tax advisors should see the numbers.
What to have ready when you call
Your attorney will usually have these.
The settlement terms for the house
Draft or final, whatever describes how the house is to be handled.
Any mortgage statement
The balance and servicer, if the house carries a loan.
Divorce property donation questions, answered
Can we donate the house before the divorce is final? +
Yes, if both owners sign and neither attorney objects. Many couples prefer to write the donation into the settlement so the court approves it as part of the division of property.
Do both spouses get a tax deduction? +
Each owner can generally deduct their share of the gift. Timing matters, because filing status changes when the divorce is final. Each spouse should ask their own advisor.
What if one spouse does not want to donate? +
Then the whole house cannot be donated. A spouse can sometimes donate their own share, but a fractional gift is complicated. It is usually better resolved in the settlement.
The house still has a mortgage. Does that stop it? +
Not automatically. A remaining balance makes the gift a bargain sale rather than a clean donation, and whether it works depends on the balance, the equity and the lender.
Will you talk to both attorneys? +
Yes. We work with both parties and both counsel, and we do not take direction from one spouse alone on a jointly owned house.
We do not provide tax or legal advice. See IRS Publication 526, Publication 561 and the Form 8283 instructions, and consult your own advisor.
Related guides
Tell us about the house and we will review it
Send the address, who is on the title and where the settlement stands, and we will tell you plainly what a donation would involve.