Both spouses are entitled to some portion of the equity in the marital home.  How much of the equity each party takes is usually in dispute.  Just as is in alimony and other property and debt division cases, the factors set forth in the divorce statute are what a Judge must consider if your case goes to trial.
You and your spouse will most likely be faced with three options – each with its own unique tax consequences:
1.  The home is sold immediately and the proceeds are split.  There would be no capital gains tax on the sale of the residence, as long as the couple lived in the home as their primary residence for at least two of the five years preceding the sale and the gain is no more than $500,000.
2.  The home is to be sold at some future date and the proceeds are split at that time.  If the Marital Settlement Agreement allows one spouse to remain in the home for some time before it is sold, some tax consequences may result.  The non-resident spouse may no longer be entitled to the $250,000 (half) exclusion from capital gains to the non-resident because the home no longer qualifies as their principal residence.
3.  One spouse buys out the other’s interest in the home.  If one spouse buys out the other’s interest in the property, careful attention must be given to any taxes owed by the selling spouse (after taking into account the $250,000 exclusion).  Special attention should be paid to taxes to be paid by the purchasing spouse on assets which must be liquidated in order to buy out the other spouse.
What is the House Worth?
No matter which approach you take, you’ll probably need your lawyer to get an appraisal of the house.  If the two of you can be cooperative, a joint appraisal should suffice.
Decisions to Make
If you’re the one who’s remaining in the marital home, make sure you can afford the mortgage payments.  Inquire about what loan options you have:  Fixed rate?  Variable rate?  15-, 20-, or 30-year loan?  You should also consider whether you really want to live in the house, or whether you’re more focused on winning the house.  Quite often, a year following the divorce, those who remain in the home report that they may have made a mistake in keeping the house.  They claim that the house represents too many atrocious memories and getting a fresh start may be in everybody’s best interest.
If you’re the one who’s leaving, think through how the move will affect your credit.  Will your name still remain on the loan?  What happens if your spouse doesn’t pay?  Even if your spouse does pay, will this hinder your ability to purchase another home since the loan on the first home is still in your name?  Will creditors downgrade your credit score?
Considerations
“    One spouse may recommend selling the house and splitting the money.  This can be detrimental because most people spend the lump sum settlement, and have nothing left to invest.  Your house is a forced savings.

“    Never sell in a down market, which is what many locales are experiencing today. Don’t sell just to get out of a bad situation.  Don’t sell at the bottom, period.

“    Make sure you have every tax advantage in keeping the house, the right to itemize deductions and deduct the mortgage interest and property taxes.  That is another benefit of owning real estate.

“    If things get really tight, consider taking in a roommate, or utilizing another rental situation.