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So You Sold Your Home, Now What?
If you’re considering selling your home or have recently sold your home, there are possible tax consequences. The good news: much of the gain on the sale of your home may be tax exempt. Here’s what you need to know:
Capital Gain Home Sale Exclusion
You can generally exclude $250,000 of any gain on the sale of your main home, or $500,000 if you are a married joint filer. To qualify, the property must be your main home and you must have lived in it for two of the past five years prior to the sale of your property.
- More than one home. If you own more than one home, your main home is the one you live in most of the time.
- Limits. You may not take the gain exclusion if you used the exclusion on another home in the two years prior to the sale of your current property.
- No deduction on a loss. If you sold your home at a loss, in most cases there is no tax benefit available through a deduction.
Tips to Make the Gain Exclusion Work for You
Know the timing. If you have used the gain exclusion in the past, be very careful that the timing of the sale of your current home meets the ...
... two-of-five-years rule. Making a mistake here could cost you a lot in additional tax.
Two homes? Plan your residency. If you have two properties, plan your living arrangements to ensure the property you’ll sell qualifies as your main home. Keep mail, driver’s license, tax returns, bank account statements and other records that show your address to provide evidence to prove your main residence.
Marriage and divorce. If you have a substantial gain and you are planning on getting married or divorced, you may need to carefully plan the timing of the sale of your primary residence to maximize the use of the $500,000 exclusion available to married joint filers.
Keep track of improvements. The longer you live in a home, the more likely you will have a gain when you sell it. Remember that the cost basis of your home can be increased by spending on home improvements, which could reduce your gains. Develop a system to keep track of the money spent to improve your residence.
If you recently sold you home and have questions about your taxes, count on our team to help. Schedule time with one of our tax professionals here: https://bas-pc.com/contact-bas/
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