Sold my moms house in 2025
My mother moved into a Memory Care facility January 2025. In order to afford the cost we sold her primary residence in October 2025. The house was held in our Family Living Trust, of which I am co-trustee and now have POA for her, since 2 doctors verified she is unable to handle her affairs. Need advice on preparing a 2025 tax return for her or the Trust. Also need advice on limiting the tax liability for the gain etc…Thank you.
Answer:
Scott, in most cases this sale is reported on your mother’s 2025 personal tax return, not on a trust return, as long as the Family Living Trust is a revocable grantor trust. The IRS still treats the home as owned by her for tax purposes. Your Power of Attorney and role as co-trustee do not change that.
The main tax issue is the capital gain.
If this was her primary residence, she may qualify for the $250,000 home sale exclusion. To qualify, she must have owned and lived in the home for at least 2 of the 5 years before the sale. Time spent in a memory care facility due to medical reasons does not automatically disqualify her. The IRS allows a taxpayer who becomes physically or mentally unable to care for themselves to still be treated as using the home, as long as the 2-out-of-5-year rule is met.
The gain is calculated as:
- Sale price
- Minus original purchase price
- Minus capital improvements
- Minus selling costs (commissions, closing fees)
If the gain is under $250,000, there may be no federal capital gains tax. If it is higher, only the excess is taxable.
What you should confirm now:
- Whether the trust was revocable at the time of sale.
- How long your mother lived in the home before entering memory care.
- The original purchase price and improvement records.
- The closing statement from the sale.
A separate trust return is only needed if the trust became irrevocable or had its own taxable income.
Handled correctly, many families owe little or no tax on this type of sale.
Melissa De Bedout
