When you sell your home, especially at a time when your taxes are due, you could get financial shelter. Thanks to The Taxpayer Relief Act of 1997, the real estate sector can receive what is considered the best tax shelter through their homes.
According to the federal tax law, 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 $250,000/$500,000 exclusion, you must have lived in the house (as your primary residence) for at least two of the prior five years. The best part is, it's not a one-time benefit. You can use this benefit as often as you qualify - every two years, to fulfill the owner-occupied-two-out-of-five-years requirement.
For example, if you have two homes and you live in one of them for two years, sell it and live in the other one for another two years and sell them both, both qualify for the exclusion. If due to some unforeseen reasons like a job change, illness, death of a spouse, divorce, disaster, war or some other hardship, you are forced to sell before you meet the two-year residency requirement, there are special provisions. In these cases, the $500,000/$250,000 exclusion (not your specific gain) will be prorated. For example, if after only a year of living in your house you are forced to sell it because of a qualified unforeseen reason, you can exclude from taxes up to $250,000 (half the exclusion) in capital gains if you are married and file jointly or $125,000 for separate and single filers.
One unforeseen event where homeowners were able to use the provision was during the September 11, 2001 acts of terrorism in New York, Pennsylvania and Washington, D.C.. Sellers were able to prorate the exclusions given these conditions:
If later, after you sell, you realize there's still a taxable profit after the exclusion, you can bring down your gain with selling costs. Your gain refers to your home's selling price, minus deductible closing costs, minus your basis. Your basis is the original purchase price, plus capital improvements, minus any depreciation.
Selling costs also include real estate broker's commissions, title insurance, legal fees, administrative costs and inspection fees. It can also include repairs or additions completed within 90 days of your sale to make the house more marketable.
If you need to move and sell your home because of a new job, you can deduct part of the moving costs. These are the requirements that need to be met:
The exclusion could also include costs for travel, transportation, lodging and storage.
If you are self-employed, you can be eligible for tax deductions if you work full-time for at least 39 weeks during the first 12 months and a total of 78 weeks during the first 24 months after arriving at the new job location.
To get more information about home selling-related tax benefits, get in touch with tax professional and state and local tax authorities in your area.
Jeff was very knowledgeable on the market what the house would sell for and what people to go after. With his help we came to a conclusion on what we could ask for and he walked me through everything. Any questions he was there to answer and paper work was a breeze. When I wasn't sure what i was signing Jeff talked me through it all and got the job done. Thank you!!! Job WELL Done!
He worked very hard for me and I would highly recommend
Being a first time home seller Jeff Maas was highly recommended to me. He walked me through the sale process and what was expected of me. The house sold in three months and for a lot more than I thought I could get for the house. Jeff would answer my questions or get the answer to my questions. He worked very hard for me and I would highly recommend Jeff Maas to anyone looking to buy or sell property.
Jeff and his staff are professional yet compassionate.
Jeff assisted us in selling a house that was owned by our deceased daughter. He was extremely helpful during a very difficult time. We are located out of state and he helped by arranging required repairs and even doing small repairs himself. Jeff and his staff are professional yet compassionate. I highly recommend them.
Jeff has the skills, experience and integrity to provide excellent service.
Jeff has the skills, experience and integrity to provide excellent service for all your real estate needs. He brought me a buyer at my price and we closed the sale sooner than anticipated.
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