Do
you know that if you sell your home and make a profit, the gain may not be
taxable? That’s just one key tax rule that you should know. Here are ten facts
to keep in mind if you sell your home this year.
1.
If you have a capital gain on the sale of your home, you may be able to exclude
your gain from tax. This rule may apply if you owned and used it as your main
home for at least two out of the five years before the date of sale.
2.
There are exceptions to the ownership and use rules. Some exceptions apply to
persons with a disability. Some apply to certain members of the military and
certain government and Peace Corps workers. For details see Publication 523,
Selling Your Home.
3.
The most gain you can exclude is $250,000. This limit is $500,000 for joint
returns. The Net Investment Income Tax will not apply to the excluded gain.
4.
If the gain is not taxable, you may not need to report the sale to the IRS on
your tax return.
5.
You must report the sale on your tax return if you can’t exclude all or part of
the gain. And you must report the sale if you choose not to claim the
exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate
Transactions. If you report the sale you should review the Questions and
Answers on the Net Investment Income Tax on IRS.gov.
6.
Generally, you can exclude the gain from the sale of your main home only once
every two years.
7.
If you own more than one home, you may only exclude the gain on the sale of
your main home. Your main home usually is the home that you live in most of the
time.
8.
If you claimed the first-time homebuyer credit when you bought the home,
special rules apply to the sale. For more on those rules see Publication 523.
9.
If you sell your main home at a loss, you can’t deduct it.
10.
After you sell your home and move, be sure to give your new address to the IRS.
You can send the IRS a completed Form 8822, Change of Address, to do this.
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