Usually, profits you earn are taxable. However, if you sell your home, you may not have to pay taxes on the money you gain. Here are ten tips to keep in mind if you sell your home this year.
Exclusion of Gain. You may be able to exclude part or all of the gain from the sale of your home. This rule may apply if you meet the eligibility test.
Exceptions May Apply. There are exceptions to the ownership, use and other rules. One exception applies to persons with a disability.
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. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
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. You must report the sale if you choose not to claim the exclusion.
Exclusion Frequency Limit. Generally, 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.
First-time Homebuyer Credit. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale.
Home Sold at a Loss. If you sell your main home at a loss, you can’t deduct the loss on your tax return.
Courtesy of IRS
For more information contact Neikirk, Mahoney and Smith at 502-896-2999
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