A Big TAX BREAK
Who doesn’t love a tax break? The reality is that for many taxpayers, there aren’t too many tax breaks they can take. However, if you’re thinking the time is right to put your house on the market and it has appreciated in value, you may be eligible for one of the most valuable tax breaks of all — the home-sale gain tax exclusion.
THE NUTS AND BOLTS
Here’s how it works: If you make a profit when you sell your principal residence, all or part of your gain may be tax free. Eligible individual filers may exclude up to $250,000 of gain from their income; married couples filing jointly may exclude up to $500,000 of gain.
USE AND OWNERSHIP TESTS
In general, this tax break is available only once every two years. To qualify, you generally must have owned and used the home as your principal residence for at least two years (a total of 24 full months or 730 days) during the five-year period ending on the date of the sale. The ownership and use periods don’t necessarily have to coincide.
Only one spouse must pass the ownership test, although neither spouse may have excluded gain from a previous home sale during the two-year period ending on the sale date. As for the use test, both spouses must pass it.
REDUCED EXCLUSION MAY BE AVAILABLE
If you have to sell your home because of a change in employment, you move for health reasons, or there are other qualifying “unforeseen circumstances,” you might qualify for a reduced exclusion. The amount of the reduced exclusion is based on the portion of the two-year use and ownership periods you satisfy.
The general information provided in this publication is not intended to be nor should it be treated as tax, legal, investment, accounting, or other professional advice. Before making any decision or taking any action, you should consult a qualified professional advisor who has been provided with all pertinent facts relevant to your particular situation. Content courtesy of Client Line Newsletter