<<CAPITAL GAINS IS NOT THE PROBLEM.
It sure as hell is. Been in my home 35 years. Hubs and I bought in 1990 for $106,000. Property values increased so my house is now worth $550,000. My husband died 3 years ago. That now makes me “Single” under the capital gains rule. That means I immediately incur a tax liability of nearly $40,000. How the hell is that fair, just because I had the misfortune to become a widow 3 years ago? This house is my only major asset. I’ve joined the ranks of the elderly who live in fear that the money will run out before I die. What do you suppose the chances are of buying a downsized home for half the cost of my old 1938 bungalow?
Sorry to hear about the loss of your husband. If you had sold within 2 years of his death you would have been eligible for the $500K exclusion. However, the details you have given seem unlikely you would need that exclusion. After living in the home for 35 years, I would suspect many improvements have been made that would add to the original cost basis. Also, the cost basis of the home would increase by 50% at the time of your husbands death. I would consult a tax professional to know where you stand.