Time to Heal Act

Key Points

• This bill, introduced by Mr. Barrett, changes tax rules for people selling their main home after a spouse dies. It allows them to keep the same tax benefits they had while they were married, regardless of how much time has passed since their spouse's death.
• Under current tax laws, married couples usually do not have to pay federal taxes on the first $500,000 of profit when they sell their home. This bill would let a surviving spouse use that same $500,000 limit instead of the $250,000 limit typically used for single people.
• The new rule would remove the current two-year deadline. Right now, widows and widowers generally only have two years after their spouse passes away to sell the house if they want to claim the higher $500,000 tax break.
• To qualify for this benefit, the person must not have remarried before the end of the year they sell the house. They also must have met the standard home ownership and residency rules with their spouse before they passed away.
• This change is intended to help people who want to stay in their family homes for many years after a loss without being penalized with a much higher tax bill when they eventually decide to move or downsize.

Impact Analysis

Govbase has not yet run an impact analysis on this legislation.