Tax Advantages of Selling a Home
If you sold your main home, you may be able to exclude up to $250,000
of gain ($500,000 for married taxpayers filing jointly) from your
federal tax return. This exclusion is allowed each time that you
sell your main home, but generally no more frequently than once
every two years.
To be eligible for this exclusion, your home must have been owned
by you and used as your main home for a period of at least two out
of the five years prior to its sale. The two years may consist of
24 full months or 730 days. Short absences, such as for a summer
vacation, count as periods of use. Longer breaks, such as a one-year
sabbatical, do not. You also must not have excluded gain on another
home sold during the two years before the current sale. Special
rules apply to members of the armed, uniformed and foreign services
and their families in calculating the 5-year period.
If you and your spouse file a joint return for the year of the
sale, you can exclude the gain if either of you qualify for the
exclusion. But both of you would have to meet the use test to claim
the $500,000 maximum amount.If you do not meet the ownership and
use tests, you may be allowed to use a reduced maximum exclusion
amount if you sold your home due to health, a change in place of
employment or unforeseen circumstances. Unforeseen circumstances
can include divorce or a natural disaster resulting in a casualty
to your home, for example.
If you can exclude all the gain from the sale
of your home, you do not report any of that gain on your federal
tax return. If you cannot exclude all the gain from the sale of
your home, or you choose not to, use Form 1040's Schedule D, Capital
Gains or Losses, to report the total gain and claim the exclusion
you qualify for.
Information from this article were
derived from the www.irs.gov website.
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