Selling a home is a stressful experiences, but when you consider all of the tax issues related to such a sale, it may be an overwhelming one. In most cases, gains from the sale of property, both personal and real, are taxable. However, the seller of a home may not always have to pay taxes. if you sell your home this year, here are ten facts to know.
- Exclusion of Gain. If you owned and used the property for sale as your main home for at least two out of the five years before the date of sale, you may be able to exclude part or all of the gain from the sale of your home if you meet the eligibility test. Parts of the test involve your ownership and use of the home.
- Exceptions May Apply. There are exceptions to the ownership, use and other rules. Exceptions apply to persons with a disability and certain members of the military.
- Exclusion Limit. The most gain you can exclude from tax is $250,000. This limit is $500,000 for joint returns.
- May Not Need to Report Sale. You may not need to report the sale to the IRS on your tax return If the gain is not taxable.
- When You Must Report the Sale. You must report the sale on your tax return if you can’t exclude all or part of the gain and if you choose not to claim the exclusion.
- Exclusion Frequency Limit. Generally, with some exceptions, you may exclude the gain from the sale of your main home only once every two years.
- Only a Main Home Qualifies. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is your principal residence, the home that you live in most of the time.
- First-time Homebuyer Credit. Special rules apply to the sale of your home if you claimed the first-time homebuyer credit when you bought the home.
- Home Sold at a Loss. If you sell your main home at a loss, you can’t deduct the loss.
- Report Your Address Change. After you sell your home and move, update your address with the IRS by filing Form 8822, Change of Address with the IRS.
If you have any questions about the tax implications of the sale of your home, contact the tax experts at the Thorgood Law Firm www.thorgoodlaw.com For a FREE consultation call 212-490-0704.
