Thinking about selling your home in 2015? Once you’ve found the perfect REALTOR®, made any repairs or renovations, staged it and negotiated your contract, you may think you’re done. But do you know what the tax implications are of selling your home?
Vanessa Borges is an enrolled agent and tax preparation supervisor with the Tax Defense Network (www.taxdefensenetwork.com), a Better Business Bureau A+ rated tax resolution company. Below is some of her advice on tax breaks for anyone selling their home:
·Know what you can exclude: The tax code allows individuals to exclude up to $250,000 in profit from the sale of their primary residence; $500,000 for married couples filing jointly. “This means that homeowners do not have to pay tax on up to $250,000 of the profit from the sale of their home, thus avoiding the capital gains tax,” Borges says.
·Keep restrictions in mind: To use the home sale exclusion, you have to meet certain ownership, use and timing qualifications. You must have owned the home for at least 2 of the last 5 years before the sale. Also, you have to have lived in it as a primary residence for at least 2 out of the last 5 years. Finally, you can’t use this exclusion if you've already taken it within 2 years.
·Take what you can get: If you don’t meet the basic qualifications, you may qualify for a partial exclusion. Generally, if you sell your home due to circumstances involving divorce, change in employment, change in health or other unforeseen circumstances but don't meet the ownership, use and timing qualifications, you may qualify for a reduced exclusion.
·Understand what counts as income: Normally, you don't need to indicate the sale of your home on your income tax return. However, you must include it if you are issued a 1099-S by your real estate agent. You can typically avoid this by certifying that you meet the ownership, use and timing qualifications at the time of closing.