Homes For Sale & Taxes � What A Seller Needs To Know
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J Harris
Mar 29, 2013, 7:00:03 AM3/29/13
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Article Title: Homes For Sale & Taxes � What A Seller Needs To Know
Author: J Harris
Word Count: 711
Article URL: http://www.isnare.com/?aid=123141&ca=Real+Estate
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=123141
Easy Publish Tool: http://www.isnare.com/html.php?aid=123141
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In May of 1997, the tax code governing profit from the sale of a personal residence was changed. In the past, any gain from a home for sale could be taxed, unless rolled over into the purchase of a new home.
The new Internal Revenue Service rules are more advantageous to sellers of homes for sale. You can no longer roll a gain into the new home; however, not all gain is taxable as in the past.
Now, homes for sale have the first $250,000 of profit exempt from any taxes, if you are the owner and filing single status. If you file jointly with your spouse, your homes for sale gain is tax exempt up to $500,000 � this is a half-million dollars, tax-free profit. This means that if you purchased a home for $200,000, you could sell it for $450,000 as a single or $700,000 as a couple and incur no taxes on the profit.
There is, however, a time and resident test that must be met in order to receive this tax exemption for your homes for sale profit. You must have lived in the home for two out of the past five years in order to qualify for the tax exemption.
What If You Don�t Meet the Time & Resident Test
So, does that mean that if you do not meet the time and resident test you then owe taxes on all of the gain? Not necessarily.
The tax code allows for several specific exemptions to the time and resident test, when you must move due to certain qualifying events. Here are a few of those events:
� You must move due to the health of one of the residents in the home (your immediate family) or the health of a relative who is in your care.
� A death in your immediate family that incurs the move, such as a breadwinner dies and the spouse cannot afford to keep the home.
� Divorce that forces a move.
� The unemployment of a breadwinner (must be qualified for and receiving unemployment compensation) and cannot afford to keep the home.
� A new job that is 50 miles further away from the home than the current job. Otherwise, if you drove 20 miles to your current job, then the new job must be at least 70 miles from the home to qualify for an exemption.
� Your home was damaged from a natural or manmade disaster, and you were forced to sell it.
� Perhaps an act of war or terrorism has caused the move.
� Even the birth of twins, triplets and so on, made the current home for sale too small and impractical to keep.
IRS publication 523, �Selling Your Home�, covers many other unforeseen events that would qualify you for an exemption.
When you do not meet the time and resident test but qualify under one of the unforeseen event exemptions, you receive only a partial exemption for the gain on your home for sale. You will be taxed on a pro-rated amount of the gain, based upon how long you actually resided in the home.
If you lived there less than a year, then the profit from your home for sale is considered to be a short-term gain. This means, on the pro-rated amount you owe taxes, you will pay the same tax rate as you do on your 1040 income tax form.
If you have lived more than one year but less than two in your home for sale, the profit is considered to be a long-term gain. Rather than paying the generally higher income tax rate, most people are taxed at 15 percent. So, if you have lived in the home for less than one year, it is to your advantage to remain there until you pass the one-year time mark � if at all possible.
The changes in the tax code for profit on homes for sale is much easier now to calculate and typically are more advantageous to the seller now, than in the past. Of course before making any home selling decisions or plans, consult a Certified Public Accountant or other tax professional.
About The Author: John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more information please visit http://www.twtrealestate.com/
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=123141
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
Message delivered directly to members of the group:
publish-the...@googlegroups.com
*****************************************************************
Please consider this free-reprint article written by:
J Harris
*****************************
IMPORTANT - Publication/Reprint Terms
- You have permission to publish this article electronically in free-only publications such as a website or an ezine as long as the bylines are included.
- You are not allowed to use this article for commercial purposes. The article should only be reprinted in a publicly accessible website and not in a members-only commercial site.
- You are not allowed to post/reprint this article in any sites/publications that contains or supports hate, violence, porn and warez or any indecent and illegal sites/publications.
- You are not allowed to use this article in UCE (Unsolicited Commercial Email) or SPAM. This article MUST be distributed in an opt-in email list only.
- If you distribute this article in an ezine or newsletter, we ask that you send a copy of the newsletter or ezine that contains the article to http://www.isnare.com/eta.php?aid=123141
- If you post this article in a website/forum/blog, ALL links MUST be set to hyperlinks and we ask that you send a copy of the URL where the article is posted to http://www.isnare.com/eta.php?aid=123141
- We request that you ask permission from the author if you want to publish this article in print.
The role of iSnare.com is only to distribute this article as part of its Article Distribution feature ( http://www.isnare.com/distribution.php ). iSnare.com does NOT own this article, please respect the author's copyright and this publication/reprint terms. If you do not agree to any of these terms, please do not reprint or publish this article.
*****************************
Article Title: Homes For Sale & Taxes � What A Seller Needs To Know
Author: J Harris
Word Count: 711
Article URL: http://www.isnare.com/?aid=123141&ca=Real+Estate
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=123141
Easy Publish Tool: http://www.isnare.com/html.php?aid=123141
*********************** ARTICLE START ***********************
In May of 1997, the tax code governing profit from the sale of a personal residence was changed. In the past, any gain from a home for sale could be taxed, unless rolled over into the purchase of a new home.
The new Internal Revenue Service rules are more advantageous to sellers of homes for sale. You can no longer roll a gain into the new home; however, not all gain is taxable as in the past.
Now, homes for sale have the first $250,000 of profit exempt from any taxes, if you are the owner and filing single status. If you file jointly with your spouse, your homes for sale gain is tax exempt up to $500,000 � this is a half-million dollars, tax-free profit. This means that if you purchased a home for $200,000, you could sell it for $450,000 as a single or $700,000 as a couple and incur no taxes on the profit.
There is, however, a time and resident test that must be met in order to receive this tax exemption for your homes for sale profit. You must have lived in the home for two out of the past five years in order to qualify for the tax exemption.
What If You Don�t Meet the Time & Resident Test
So, does that mean that if you do not meet the time and resident test you then owe taxes on all of the gain? Not necessarily.
The tax code allows for several specific exemptions to the time and resident test, when you must move due to certain qualifying events. Here are a few of those events:
� You must move due to the health of one of the residents in the home (your immediate family) or the health of a relative who is in your care.
� A death in your immediate family that incurs the move, such as a breadwinner dies and the spouse cannot afford to keep the home.
� Divorce that forces a move.
� The unemployment of a breadwinner (must be qualified for and receiving unemployment compensation) and cannot afford to keep the home.
� A new job that is 50 miles further away from the home than the current job. Otherwise, if you drove 20 miles to your current job, then the new job must be at least 70 miles from the home to qualify for an exemption.
� Your home was damaged from a natural or manmade disaster, and you were forced to sell it.
� Perhaps an act of war or terrorism has caused the move.
� Even the birth of twins, triplets and so on, made the current home for sale too small and impractical to keep.
IRS publication 523, �Selling Your Home�, covers many other unforeseen events that would qualify you for an exemption.
When you do not meet the time and resident test but qualify under one of the unforeseen event exemptions, you receive only a partial exemption for the gain on your home for sale. You will be taxed on a pro-rated amount of the gain, based upon how long you actually resided in the home.
If you lived there less than a year, then the profit from your home for sale is considered to be a short-term gain. This means, on the pro-rated amount you owe taxes, you will pay the same tax rate as you do on your 1040 income tax form.
If you have lived more than one year but less than two in your home for sale, the profit is considered to be a long-term gain. Rather than paying the generally higher income tax rate, most people are taxed at 15 percent. So, if you have lived in the home for less than one year, it is to your advantage to remain there until you pass the one-year time mark � if at all possible.
The changes in the tax code for profit on homes for sale is much easier now to calculate and typically are more advantageous to the seller now, than in the past. Of course before making any home selling decisions or plans, consult a Certified Public Accountant or other tax professional.
About The Author: John Harris is an expert researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more information please visit http://www.twtrealestate.com/
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=123141
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
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