The Gains of Selling Your Home When It Comes to Taxes
Most only think they get the tax break when they first purchase their home and they don’t realize that their home can save them money at tax time when they sell it as well. So read on the learn the impact that your home can have on your taxes.
Are you considering selling your home? If you sell your home and make a profit it is actually likely to reduce your tax amount and allow you to have a tidy profit. So holding out for the best price can be in your best interest.
According to IRS tax law you can actually sell your home and make a profit. You are allowed to exclude the first $250,000 profit from the sale of your home from your taxes if you are single and $500,000 if you are married filing joint. So as you can see this is one area where the capital gain can actually be in your favor.
However, be aware that there are in fact requirements when it comes to getting a tax break. You have to have lived in your home for two years out of the last five years. Usually this tax gain can only be used every two years which is great because many people do not move every two years. This is a requirement that many people have no problem with.
Sometimes, people have good reasons as to why they have to sell their homes before living in it for two years. One of the biggest reasons is a new job. Some people have to move to be able to commute back and forth from home to work. Others have to move because the company moved.
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 these reasons can benefit you when dealing with taxes and exclusion. If you need or want to know how much money you can deduct during tax season, simply divide the number of months you have lived in your home by 24. Then take the number you get, multiple it by the full exclusion, and you then have your gain that you can deduct when filing taxes.
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.
Filed under: Business