SELLING YOUR HOME
The following IRS tax rules apply when you sell your home.
Home defined: This is your main home or your main personal residence. It can be a single-family home, condominium, cooperative apartment, mobile home, or houseboat with living quarters. You can only have one main home or one main personal residence at one point in time. It is NOT a second or vacation home or a rental property.
Maximum Exclusion of Gain On Sale:
You sale qualifies for maximum exclusion of $250,000 ($500,000 if married filing jointly) if the following is true:
A-You owned the home AND used it as your main home during at least 2 of the last 5 years before the date of sale. (Ownership and Use Tests).
If you OWNED the home for at least 24 months (2 years) during the last 5 years leading up to the date of sale.
If your home was your MAIN RESIDENCE for at least 24 of the months you owned the home during the 5 years leading up to the date of sale; the 24 months can fall anywhere withing the 5 year period, it doesn't have to be a single block of time.
B-You did not claim any exclusion for the sale of a home that occurred during the 2 year period ending on the date of sale of the home, the gain from which you now want to exclude.
C-You did not acquire the home through a like-kind exchange during the paet 5 years.
D-You do not have any depreciation on the home from prior use as a rental property. (Depreciation Recapture).
If you used all or part of your home for business or rental after May 6, 1997, you may need to pay back (recapture) some or all of the depreciation you were entitled to take on your property. Recapturing depreciation means you must include it as taxable ordinary income on your tax return.
Partial Exclusion of Gain:
If you don't meet the maximum exclusion requirements, you may still qualify for partical exclusion if you moved beacuse of the following:
A-Work-Related Move
B-Health-Related Move
C-Unforeseeable Events-Related Move
Married, Divorced, or Widowed:
Married individuals may exclude up to $500,000 of gain if they file a joint return ADN neither spouse excluded gain on the sale of another home withing a previous 2-year period. If one spouse meets the ownership requirement, booth are considered to have met the requirement. Each spouse must individually meet the main residence requirement.
Death of s spouse-If you sell your home after your spouse dies (within 2 years after your spouse dies), and you have not remarried as of the date of sale, you can count any time your spouse owned the home as time you owned it, and any time when the home was your spouse's main residence as time when it was your main residence.
Divorce or Separation-You can count a home as your main residence during any period when ALL of the following are true:
1-You are a sole or joint owner
2-Your spouse or former spouse is allowed to live in it under a divorce or separation agreement,
3-Your spouse or former spouse uses it as his/her main residence (not just as a second home).
Home acquired through transfer from spouse-If your home was transferred to you by a spouse or ex-spouse (whether in connection of a divorce or not), you can count any time when your spouse owned the home as time when you owned it. However, you must meet the main residence requirement on your own.
Figuring Gain or Loss: Basic Calculation is as follows-
Gross selling price
Less: Selling/Closing/Settlement expenses
= Amount Realized
Less: **Adjusted Basis on date of sale
= Gain (Loss)
NOTE: A loss on the sale of your main home (personal residence) is NEVER deductible.
NOTE: The old rule where you had to purchase another home no longer applies.
**Different Adjusted Basis rules apply depending on if the home was purchased, received as a gift, received in divorce, or inherited.
CALL NOW 561-746-1926 or 561-339-8102 if you have any questions or concerns or would like to schedule a FREE, Confidential, No-Obligation Tax-Saving Consultation.