Home Selling Tax Tips 2014

Home Selling Tax Tips in 2014

Home Selling Tax Tips

Live in your home for 2 years before selling

If you have lived in your home for two of the five years before selling it, you do NOT have to pay taxes on gain of up to $500,000 for joint returns, or up to $250,000 for an individual return.

You may also be able to sell your rental property and possibly  pay no capital gains tax if you have lived it in for 2 years as your primary residence in the last 5 years and have not sold another home in the last 2 years.

Read the IRA Publication 523 on Selling Your Home for more information on the tax implication of selling your home.

Wait 2 years from the sale of your last principal residence to qualify for the above exclusion again.

Uncle Sam will not allow you to keep selling a home every year with profit and not pay taxes. So if you have used a tax exclusion from on the sale of your home in the last two years, you may end up paying taxes. So, wait 2 years if you can. If you are lucky enough to make a significant profit above the exclusion amounts ( $500,000 joint/$250,000 individual), congratulations! However, note that any amount over the exclusion amount may be taxable.

You cannot write off any losses on the sale of your principal residence.

Keep good records of all expenses you have incurred on the property such as home improvements, real estate sale related expenses, etc.

First-Time Homebuyer Credit

Read more on the First Time Home Buyer Credit: IRS

If you received the $7,500 first-time homebuyer credit for the purchase of a home in 2008, you must repay the credit by adding $500 each year to your tax bill — for 15 years — starting with your 2010 return. And, if you sell the home before the end of that 15 year period, you must repay any part of the credit that remands unpaid with the tax return for the year of the sale.

In general, the $8,000 credit for first-time buyers and $6,500 credit for long-time residents who bought homes in 2009 and 2010 does not have to be repaid — unless you sell the home or otherwise stop using it as your principal residence within three years of the time you bought it. If you move out of the place before those 36 months are up, you have to repay the credit with the tax return for the year you leave the house. Note: You never have to repay more than the profit on the sale of the home. So, if you sell for a loss during the three year period, you don’t have to repay the credit. If you have have bought your home in 2009 and 2010, you are now likely in a position to sell your home in 2014 without paying taxes as the three year period may have already passed subject to having lived in the home as your primary residence in the last 3 years.

There are a few exceptions to the repayment requirement. It’s waived in the case of death, for example, or if the home is “involuntarily converted” from your principal residence (i.e. destroyed in a storm) and you buy a new principal residence within two years. Another exception waives the repayment requirement if the owner transfers the home to a spouse or former spouse incident to a divorce. And, service members who cease using the home as a principal residence within three years as a result of being deployed more than 50 miles away from the home for more than 90 days or indefinitely do not have to repay the credit. If none of the exceptions apply, however, someone who sells for a profit or ceases to use the home as his or her principal residence during the first 36 months after purchase would be required to repay the credit.

Read more at http://www.kiplinger.com/article/taxes/T054-C000-S001-tax-planning-for-selling-your-home.html#mmu7RDo8cobu1Ozr.99

Consult a tax professional on all tax matters relating to the sale of your home

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