These Tax Tips for Selling Your Home Could Save You Thousands
Uprooting yourself and moving somewhere new can be tough. But facing a big tax bill because of it can be even more, well, taxing. That’s why we’re offering these tax tips for selling your home.
Excluding Your Gain
You made a profit on selling your home – mazel tov! And even better news, you may not have to pay taxes on your gain. Gain is basically your selling price minus what you paid for it. What you paid for it can actually have several factors – check with your accountant.
Single filers can exclude up to $250,000 of gain on the sale of their main home. A couple filing a joint return can exclude up to $500,000. The ownership tests to qualify for the exclusion:
- You must own and live in it as your main home for two of the five years prior to the sale.
- You can’t have used the exclusion on another house within two years prior to selling the house.
If you don’t meet those tests, or your profit was bigger than the dollar limit, you will have to pay capital gains tax on the amount that doesn’t qualify.
What if you lost money on the sale? Well, to add insult to injury, you can’t deduct the loss on your taxes.
Flunk the Test? You May Get a Reduced Exclusion
What if you didn’t live in the home for two of the last five years? The IRS allows for some unforeseen circumstances, and you may qualify for a reduced exclusion. Those circumstances include a change in employment, health changes, divorce, multiple births from a single pregnancy, and more. Check with your friendly neighborhood accountant.
Tax Tips for Selling Your (Other) Home
Are you a snowbird? Lucky you. However, you can’t claim the exclusion on multiple homes. Also, the exclusion only applies to the house where you spent the majority of your time. But say you plan to sell that vacation home, or rental house. If you move into that home and make it your main residence for two years, you can use the exclusion again.
But if you expect to sell your other main home soon (and will make a bigger profit when you do), you may opt to skip using the exclusion. If you can satisfy the other requirements, then you can use it on the second without having to wait another two years.
Don’t Forget…
You sold your house, made it through the move, and you’re living in your brand-new home. Yay! Don’t forget to let the IRS know. You can use the Change of Address Form 8822.[https://www.irs.gov/pub/irs-pdf/f8822.pdf] Oh, and don’t forget to tell that friendly neighborhood accountant, too! You don’t need to fill out a form for that – we’re happy to take a phone call.
Links
Want even more info? The IRS offers Publication 523, Selling Your Home.
Lastly, you can learn more about our services here!
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