Tax Implications of Selling
a Home
Selling
a home can have a major impact on your federal and state tax returns.
Check with your
tax consultant on the factors that may affect taxes resulting from
the sale of your home. For example:
- Whether you
purchased the home or acquired it by gift or inheritance
- Whether you
used your home partly for business or rental
- Costs associated
with selling your home
- Home improvements
or additions, which may help to offset capital gains
- Gain from
the sale of a prior home on which tax was postponed prior to the
enactment of the federal Taxpayer Relief Act of 1997
The federal
Taxpayer Relief Act of 1997 says when you sell your home you can
keep, tax free, capital gains of up to $500,000 if you are married
filing jointly or $250,000 for single taxpayers, or married taxpayers
who file separately. To qualify for the exclusion, you must have
used the home as your principle residence for at least two of the
prior five years. It is not a one time tax exclusion. You can use
the exclusion as often as you meet the qualifications.
The federal
Internal Revenue Service Restructuring and Reform Act of 1998 further
clarified the law and says you can prorate the $500,000/$250,000
exclusion (not your specific gain) if unforeseen events, such as
a job change, illness, or some other hardship forced you to sell
before you meet the two-year residency requirement.
Many, but not
all federal tax benefits are also available from state tax departments.
Be sure to discuss your move with a tax professional familiar with
state tax rules, especially if you are moving from one state to
another.
-Adapted from the MetLife Consumer Education Center
with assistance from the National Association of the Remodeling
Industry.
More articles:
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About
The Sonoran Desert Of Southern Arizona
Call
ManaDeva directly at 520.404.3635
Mana@ManaDeva.com
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