Homes For Sale & Taxes-What A Seller Needs To Know

 

The tax code that governs profit from the sale or lease of a personal dwelling was amended in May 1997. Any gain on a home sold in the past could have been taxed unless it was rolled over to the purchase of a new property.

Sellers of homes for sale will find the new rules from the Internal Revenue Service more beneficial. Gains cannot be rolled into a new home. However, not all gains are taxable.

If you are the sole owner of the property and have a single filing status, the first $250,000 of the profit is exempted from taxes. Your homes for sale gains are exempt from tax if you file jointly with your spouse. Sedona Homes For Sale This is a half million dollar profit that is tax-free. If you buy a home worth $200,000, it is possible to sell it for $450,000 or $700,000. This will allow you to avoid paying taxes on any profit.

To qualify for the tax exemption on your homes for sale, there is a time-and-resident test. To qualify for the tax exemption, you must have lived in your home for at least two of the last five years.

What if you don't meet the time & resident test?
Does that mean you owe tax on all the gain if you fail to meet the time-and-resident test? Not necessarily.

There are several exemptions from the resident and time test that can be granted by the tax code when you have to move because of certain events. These are just a few examples of these events.

o You have to move because of the health or safety of a resident in the home (your immediate relatives) or a relative in your care.

o Death in the immediate family, such as the death of a breadwinner or spouse who cannot afford to move.

o A Divorce that Forces a Move

o A breadwinner who is unemployed and cannot pay for the home.

o A job 50 miles farther from your home than the current one. If you drive 20 miles to your job, the new job must be 70 miles away to qualify for exemption.

o Your home was destroyed by a natural or man-made disaster and you had to sell it.

o It could be a terrorist act or war that caused the move.

o The current house was too small to be kept after the births of triplets, twins, and other children.