Here’s What You Need to Know About Taxes.
Congratulations on selling your home! After you break out the bubbly and toast the sale, it’s time to review your tax consequences.
Taxable Gain Exclusion
If you meet certain conditions (which we’ll get into below), you can exclude the first $250,000 of any gain you receive.
This exclusion doubles to $500,000 for married filing jointly.
Now, there are some limits to this.
Main Residence Only
The taxable gain exclusion applies only to your main residence. If you own two homes as our some of our snowbirds do, your main residence is not necessarily the home that you live in most of the time. You’ll need mail, bank account statements, tax returns, driver’s license and voter’s registration to prove main residency.
Two-of-Five Years Rule
You must have lived in the home that is your primary residence for at least two years out of the last five.
The good news is that the two years do not need to be consecutive years.
You Can Only Get the Exclusion Once Every Two Years
If you sold your home any time in the past two years for a gain and used the exclusion, you may not take it this time around.
Losses Don’t Factor In
If, on the other hand, you sold your home at a loss, there won’t be a tax benefit (sorry!).
Tax Planning to Maximize Your Exclusion
Knowing how the taxable gain exclusion works means that you can plan ahead.
If you have more than one house, you may want to arrange your life so that whichever home you are selling will qualify as your main residence. Remember it’s not about how long you live in one state versus another.
If nuptials are in your future, you may want to time your marriage to take advantage of the $500,000 exclusion. If there is an impending divorce, it may make sense to delay finalization if possible.
Finally, you should always keep track of the money you spend making improvements to your home. These expenses can go against your gains and can possibly reduce your tax burden.
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Jeffrey Schneider, EA, CTRS, NTPI Fellow has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting Services as well as the Enrolled Agent and Certified Tax Resolution Specialist for SFS Tax Problem Solutions.
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Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.
The book is available in paperback and ebook on https://Amazon.com
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For more on SFS Tax Problem Solutions, visit: http://sfstaxproblemsolutions.com/
For more on SFS Tax & Accounting Services, visit https://sfstaxacct.com/
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738 Colorado Avenue Stuart, FL 34994
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Phone: 772-337-1040
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https://www.linkedin.com/company/sfs-tax-problem-solutions/
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