If you’re taking advantage of the summer weather by planning a home sale, you should be aware of a few tax facts. Here are a few tips from the IRS.
1) Profits from a home sale are not always taxable. There are times when you might be able to exclude your gains from being taxed.
For example, if you owned and used your home as a primary residence at least two out of the five years before the sale date, you might be in luck.
2) If you don’t meet the ownership and use rules, there are some exceptions. For example, exceptions may apply to those who are disabled, certain members of the military, and certain government and Peace Corps workers. “Publication 523, Selling Your Home,” has more information.
3) The most gain you can exclude from a home sale is $250,000. Joint returns have a limit of $500,000 for joint returns. In addition the Net Investment Income Tax does not apply to the excluded gain.
4) You are required to report the sale on your tax return if all or part of the gain cannot be excluded. In addition, you must report the sale if you decide not to claim the exclusion. Generally, gains from the sale of your main home can only be excluded once every two years.
5) Those who claimed the first-time home buyer credit are subject to special rules. For detailed information, see Publication 523.