Capital Gains Taxes and Selling Your Home

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Capital Gains Taxes and Selling Your Home

by: TonyKnapp | Total views: 3 | Word Count: 492 | View PDF | Print View
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A lot of people believe that by buying a house, they will be able to save money in taxes during the first tax season of living there. On the flipside, selling your home is a good way to get a tax break.

Are you ready or planning to sell your home? If you are, selling your home at a decent profit can put loads of money in your wallet. It can also lead to a reduced tax bill. Those who wait for the best deal to come around are not smart.

When you sell your house to make a profit, the first $250,000 can be taken away during tax season. Even better, if you are married and you file together with your husband or wife, the amount of money doubles. This a great gain for anyone!

Now having explained that you also need to know that there are some stipulations as well. The first stipulation is that in order to qualify for the $250,000 or $500,000 is that the home that you are selling has to have been your primary residence for 2 out of the previous 5 years. This basically means that this tax break can only be used every 2 to 3 years. This should be a problem considering that the average time most people stay in their home is 7 years.

Reasons such as job relocation may cause someone to have to sell their home before they have lived in it for 2 years. Job relocation can be due from your employer moving you or even you applying for a new position with another company.

Health problems can also cause someone to have to leave their homes. This is a reason that the IRS will accept; however, the IRS wants the reason as to why they need to be substantiated by a doctor. This will be for your own personal records if in case you are audited.

Other reason people end up selling their home is due to a natural disaster. If this happens there are guidelines, set out by the IRS where you will be able to claim this exemption on your taxes. There are a number of natural or other disasters that qualify in this area; divorce, death, war, terrorist attacks, multiple births or separation form spouse.

All of the reasons listed above can get you part of the benefit of exclusion when dealing with your taxes. If you are curious and want to know how much money you will be able to deduct when filing your taxes, divide the number of months you have lived in your home by 24. Then take this number and multiple it by the amount of exclusion you are given. The final number is your gain tax season.

Selling your home is most definitely able to lower your tax income when it comes time to file a return. If you are interested in exclusion, visit the IRS website and read about Tax Topic 701. It deals with selling homes.
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