TAX FREE GAIN WHEN SELLING YOUR PERSONAL RESIDENCE
Courtesy of Dan & Patty McInnes
CONSULT YOUR TAX ADVISOR FOR ANY SPECIFIC TAX ADVICE AND
FOR DETAILS ON EACH OF THESE ISSUES AS IT EFFECTS YOUR SITUATION.
TAX FREE GAIN WHEN SELLING YOUR PERSONAL RESIDENCE
Courtesy of Dan & Patty McInnes
CONSULT YOUR TAX ADVISOR FOR ANY
SPECIFIC TAX ADVICE AND
FOR DETAILS ON EACH OF THESE ISSUES AS IT EFFECTS YOUR SITUATION.
TAKE GAIN UP TO $500,000 TAX FREE !
Residential real estate has excellent tax benefits because of the new tax laws which allow a married couple to take up $500,000 gain tax free and a single person to take $250,000 gain tax free on their primary residence. Gain is no longer rolled over from one house to another. Each purchase starts the calculation of gain all over. If there is more than $500,000 gain, the remainder is taxed as capital gains rates. There are lower capital gains rates for properties held more than one year which would generally apply to residences since they must be primary homes for at least two years to qualify for the $500K tax free status.
Because this tax treatment of gain varies for each person, it is very important to contact your accountant for specific tax advice for your personal circumstance.
The old rule of $125,000 deduction "once in a life time" is gone. Personal residences can be sold every two years.
Technically, you could take $500,000 gain one year, move to a new home, sell in two years and take another $500,000 gain. Realistically, few properties would gain this much in two years, but that illustrates the new rules. You can also move into a rental property and then sell it after two years and take the gain tax free. To do this, however, you must have owned the rental property for five years. There are other rules affecting rental conversions including depreciation recapture. Gain calculations can also be complex if you have owned several homes.
"In most cases, taxpayers can only take advantage of the provision once during a two-year period. However, a reduced exclusion is available if the sale occurred because of a change in place of employment, health, or other unforeseen circumstances...The rules can get pretty complicated if you marry someone who has recently used the exclusion provision, if the residence was part of a divorce settlement, if you inherited the residence from your spouse, if you sell a remainder interest in your home or if you have taken depreciation deductions on the residence.
Not everyone benefits with this new law. Homeowners who sell at a loss still will not be able to claim a deduction. Also, homeowners with profits of more than the $250,000/$500,000 limits could have to pay more tax under the new law since Congress repealed the provision allowing owners to defer gains by rolling over home-sale proceeds in to a new home costing the same or more.
On balance, though, the new is good. We finally have a tax break that most of us can actually use and the savings can be substantial."
Based on information provided by Tom Tignino of Thomas Tignino & Associates, LLP (805) 494-6744 or 1-888-TIGNINO 600 Hampshire Rd. #210 Westlake Village, CA 91361 before the sale or exchange.
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Dan
and Patty McInnes Scott-McInnes & Company, Realtors 3600S. Harbor Blvd., #129 Oxnard, CA 93035 TOLL FREE - 1(800) 985-VIEW (805) 985-4949 Fax (805) 985-9552 |
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