A quiet tool

The house and the IRA are not the same number.

One carries a mortgage, selling costs, and tax on its gain; the other carries income tax on every dollar. Enter both and your rates and see what each is really worth, and what an even trade would be.

§§ 121, 1041, 408(d)(6), 72(t) · Last reviewed September 7, 2026 · Facts · The table · Methodology

https://consideratecapital.com/tools/house-or-ira-in-divorce

What the house is worth

Today's market value, before the mortgage is taken off.

The IRA or 401(k) offered in exchange

The account's current balance, before any tax.

Mortgage still owed on the house

What the house cost, plus improvements

The purchase price plus what was spent on improvements. The gain is measured from this.

Income tax rate on IRA withdrawals

The federal bracket that will apply when the money comes out.

Capital gains tax rate on the house

The federal rate on the gain when the house is eventually sold.

Selling costs

Agent commission and closing costs, as a share of the sale price.

The spouse taking the IRA is

59½ or older, or will not touch it before thenUnder 59½ and would withdraw before then

Money taken from a 401(k) under the divorce court's order avoids the early-withdrawal penalty. Money taken from an IRA does not.

The house is worth more after tax, by

$65,700

After tax, the house is worth $521,700 and the IRA is worth $456,000. The house starts as $600,000 of equity after the mortgage, less $48,000 of selling costs and $30,300 of tax on the gain above the $250,000 exclusion. The IRA starts at $600,000, less $144,000 of income tax. To match the house, the IRA would need to be $686,447.

Taxable gain on the house: $202,000; $452,000 of gain, less the $250,000 exclusion
Tax owed on the IRA when withdrawn: $144,000; 24% of every dollar withdrawn
IRA balance that equals the house after tax: $686,447; The even trade, once both sides are taxed

Whoever keeps the house will one day sell it as a single filer with a $250,000 exclusion, and can count the years the other spouse lived there. Whoever takes the IRA pays income tax on every dollar withdrawn, at whatever rate applies then, plus a penalty before 59½ unless the money comes straight out of an employer plan under the court order. Neither number appears on the settlement sheet.

This follows the federal rules for the home sale exclusion after a divorce, for tax-free transfers between divorcing spouses, and for the early-withdrawal penalty exception on an employer plan split by court order. It uses today's values and the rates you set, with no growth in either asset, no investment surtax, no state tax, and no cost of carrying the house on one income (the sell-or-keep tool prices that). Educational, not advice.

This is a simplified model, not your actual tax return or plan. It only knows what you type in, leaves out rules that may apply to you, and cannot weigh the other facts and trade-offs a real decision depends on. Before you act, talk with a professional who knows your whole situation.

Built by Joshua Mangoubi, CFA, MBA. By using this tool you agree to the tool terms, which include that results vary with each use and over time. Cite this tool, or take a table or chart

How it counts. The house's equity less selling costs and the tax on its gain above the single filer's exclusion, against the account less income tax and, where it applies, the early-withdrawal tax; the difference, and the account balance that would be even.

What it assumes. Today's values and the rates you set; no appreciation, no growth, and no cost of carrying the house on one income. The order that lets a 401(k) share be drawn without the penalty, and a pension's valuation, are the family law attorney's and the actuary's.

Where we fit in. We integrate tax considerations into your investment strategy and collaborate with estate attorneys and CPAs to ensure your plan is coordinated. We are not a law firm or accounting firm, so we do not provide legal or tax advice. Everything in this material is for educational purposes, based on primary sources. Before taking any action, please consult the appropriate professionals to apply these ideas to your situation.

The facts, in one place.

Six quotable sentences on trading the house for the retirement account.

The house comes with its mortgage, the cost of eventually selling it, and the tax on its gain; the IRA comes with ordinary income tax on every dollar. Two assets at the same number on the settlement sheet are rarely worth the same to the spouse who takes each.
After a divorce the spouse who keeps the house has the single filer's $250,000 exclusion on the gain, not the couple's $500,000, and the other spouse's years in the home count toward the two-of-five test (§ 121(d)(3)).
An IRA received in a divorce is the recipient's own IRA; withdrawals before 59½ carry the 10 percent additional tax. A 401(k) share taken under a qualified domestic relations order does not, which is a reason to draw cash from the plan before rolling the rest.
Example: a house worth $800,000 with a $200,000 mortgage, bought for $300,000, against a $600,000 IRA. After selling costs and the tax on the gain above the exclusion, the house is worth about $521,700; after 24 percent tax, the IRA is worth $456,000. To match the house, the IRA would need to be about $686,447.
The house's number also depends on the spouse's ability to carry it: the mortgage, the taxes, and the upkeep on one income, which the sell-or-keep tool prices.
Neither asset's future is certain: the house may appreciate or not, and the IRA's tax depends on the rate when it is withdrawn. The comparison is at today's figures and today's rates, which is what the settlement is signed against.

What each asset carries.

Why the same number is not the same value.

The costs attached to a house and to a retirement account received in a divorce (§§ 121, 1041, 408(d)(6), 72(t))
Asset	What comes off the top	Rate
The house	The mortgage; selling costs; capital gains tax on the gain above the single filer's exclusion	$250,000 excluded; 15% or 20% on the rest, plus the 3.8% surtax where it applies
A traditional IRA or 401(k)	Ordinary income tax on every dollar withdrawn; the 10% penalty before 59½ (not from a plan under a court order)	The recipient's bracket
A Roth account	Nothing, once qualified	0%
A brokerage account	Capital gains tax on the built-in gain; the basis carries over (§ 1041)	15% or 20%

How the comparison works.

The most common trade in a divorce is the house against the retirement account, at matching numbers. Neither number is what the spouse who takes it will have. The house carries its mortgage, the cost of selling it one day, and tax on the gain above the single filer's exclusion, which is half the couple's; the other spouse's years in the home count toward the use test, so the exclusion itself is usually available. The retirement account carries ordinary income tax on every dollar, at whatever rate applies when it is withdrawn, and the early-withdrawal tax before 59½ unless the money is taken from an employer plan under the court order.

The calculator prices both at today's figures and the rates you set, and reports the retirement-account balance that would match the house after tax. It leaves out what the house will do next and what the account will earn, because a settlement is signed against today's numbers, and the carrying cost of the house on one income, which the sell-or-keep tool prices.

Methodology.

Inputs. The house's value, mortgage, and cost basis; selling costs as a share of value; the retirement account; the ordinary and gains rates; and whether the account's recipient is under 59½ and would withdraw before then.
The house. Equity (value less mortgage), less selling costs, less the gains rate on the gain (value less selling costs less basis) above the single filer's exclusion (§ 121(b)(1), (d)(3)).
The account. The balance less the ordinary rate, less 10 percent of the balance where the early-withdrawal tax applies (§ 72(t); the plan exception at (t)(2)(C)).
The match. The house's after-tax value divided by the after-tax fraction of an account dollar: the balance that would be an even trade.
Validation. A pinned case with a mortgage, selling costs, and a gain over the exclusion, with and without the early-withdrawal tax. A transcription error fails the build.
Not modeled. Appreciation and growth, the time value of the account's deferral, the surtax, state tax, the cost of carrying the house on one income, and a pension's valuation. Educational, not advice.

Sources.

1. United States Code (Cornell LII), 26 U.S.C. § 1041 — Transfers of property between spouses or incident to divorce. That no gain or loss is recognized on a transfer between spouses or incident to divorce, and the recipient takes the transferor's basis: the tax travels with the asset. Retrieved September 6, 2026; verified September 6, 2026.
2. United States Code (Cornell LII), 26 U.S.C. § 408(d)(6) — Transfer of an IRA incident to divorce. That an IRA interest transferred to a spouse or former spouse under a divorce or separation instrument is not a taxable transfer and becomes the recipient's own IRA, with the ordinary rules, including the early-withdrawal tax, applying to the recipient from then on. Retrieved September 6, 2026; verified September 6, 2026.
3. United States Code (Cornell LII), 26 U.S.C. § 72(t)(2)(C) and (t)(3)(A) — Distributions to an alternate payee under a qualified domestic relations order. That a distribution from an employer plan to an alternate payee under a qualified domestic relations order is exempt from the 10 percent additional tax, and that the exemption does not extend to IRAs. Retrieved September 6, 2026; verified September 6, 2026.
4. United States Code (Cornell LII), 26 U.S.C. § 414(p) — Qualified domestic relations order defined. What a qualified domestic relations order is: a court order under state domestic relations law that assigns part of a participant's plan benefit to a spouse, former spouse, child, or dependent, and the requirements it must meet for the plan to honor it. Retrieved September 6, 2026; verified September 6, 2026.
5. United States Code (Cornell LII), 26 U.S.C. § 121(d)(3) — Property of a spouse or former spouse. That a spouse who receives the home in a divorce counts the other spouse's ownership period as their own (A), and that a spouse who moves out is treated as still using the home while the former spouse is granted use under the divorce instrument (B). Retrieved September 6, 2026; verified September 6, 2026.
6. Illinois Appellate Court, First District (CourtListener), In re Marriage of Hunt, 78 Ill. App. 3d 653 (1st Dist. 1979). The two ways an Illinois court divides a pension: an immediate offset of its present value at dissolution, or reserved jurisdiction, under which the non-employee spouse receives a share of each benefit payment equal to the months of plan participation during the marriage over the total months of participation at retirement, the coverture fraction that carries the case's name. Retrieved September 7, 2026; verified September 7, 2026.
7. Illinois Appellate Court, First District (CourtListener), In re Marriage of Richardson, 381 Ill. App. 3d 47 (1st Dist. 2008). That under the reserved-jurisdiction method the marital fraction is applied to the benefit as actually paid at retirement, including increases from post-dissolution service and salary, the fraction itself shrinking as service continues; a decree that instead freezes the benefit at the dissolution date is the alternative the tool shows for comparison. Retrieved September 7, 2026; verified September 7, 2026.
8. Illinois General Assembly, 750 ILCS 5/503(b)(2) — Pension benefits acquired during the marriage are presumed marital property. That all pension benefits, including those under the Illinois Pension Code, defined benefit and defined contribution plans, IRAs, and non-qualified plans, acquired by or participated in by either spouse after the marriage and before the judgment are presumed marital property, and that division of a public pension is enforceable under Section 1-119 of the Pension Code. Retrieved September 7, 2026; verified September 7, 2026.
9. Illinois General Assembly, 40 ILCS 5/1-119 — Qualified Illinois Domestic Relations Orders. That benefits under the state's public retirement systems (SERS, SURS, TRS, IMRF, the Chicago funds, and the rest) are divided only by a QILDRO in the statutory form, as a fixed dollar amount or a percentage set out in a QILDRO Calculation Court Order; and that a QILDRO against a member who began participating on or before July 1, 1999 is not effective without the member's written consent (m). Retrieved September 7, 2026; verified September 7, 2026.
10. United States Code (Cornell LII), 29 U.S.C. § 1056(d)(3) (ERISA § 206(d)(3)) — Qualified domestic relations orders. That the anti-alienation rule for private plans yields to a qualified domestic relations order, and what such an order must state; the parallel definition is § 414(p) of the Internal Revenue Code. Retrieved September 7, 2026; verified September 7, 2026.
11. United States Code (Cornell LII), 26 U.S.C. § 121 — Exclusion of gain from sale of principal residence. The two-of-five-year ownership and use test (a); the $250,000 limit (b)(1) and $500,000 on a joint return (b)(2); the surviving spouse's $500,000 for a sale within two years of the death when the joint conditions were met at death (b)(4); the reduced exclusion for a change in employment, health, or unforeseen circumstances, prorated over two years (c); and the tacking of a deceased spouse's ownership and use (d)(2). Retrieved September 6, 2026; verified September 6, 2026.

Revision history.

The record's history.

September 7, 2026: Added the pension division sources for the marital-share tool: Hunt and Richardson (the coverture fraction under reserved jurisdiction), 503(b)(2) (pension benefits presumed marital), 40 ILCS 5/1-119 (QILDRO for public pensions, the pre-July-1999 consent rule), and ERISA § 206(d)(3) (QDRO for private plans).
September 6, 2026: First release of the divorce record for the retirement-account split and the house-or-IRA comparison: the IRA transfer rule, the QDRO exception, the § 1041 carryover basis, and the home exclusion after a divorce.

Canonical address: https://consideratecapital.com/tools/house-or-ira-in-divorce

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