This month Joel Lee, CPA discusses capital gains and how you can benefit from the sale of your house when filing your taxes.
These are some points to consider when selling your home for a profit:
- Persons can exclude up to $250,000 in profit from the sale of a main home (or $500,000 for a married couple) as long as you have owned the home and lived in the home for a minimum of two years. Those two years do not need to be consecutive. In the 5 years prior to the sale of the house, you need to have lived in the house for at least 24 months in that 5-year period. In other words, the home must have been your main residence.
- If you are unable to stay in your home for the two year minimum, you are still able to have some of the gain shielded from taxes providing that you sold your house because of a job relocation, health issues, or for some other unplanned situation.
- If you had to leave your home before the two years is up, you can still exclude a portion of your gain on the sale of your house if it was as a result of a job relocation. This would be the case if you started a new job, or if you had to move to a new location because it was requested by your employer.
- Medical or health issues are also legitimate reasons for having to sell your home, just be prepared with a doctor’s note to justify the medical situation. You wouldn’t have to include it when you file your return, but you will need to provide it in the event that the IRB or IRS requires proof if your return gets selected for review.