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Top 10 Tax Facts for Selling Your Home

Understanding tax consequences is something you need to know before putting your house on the market. Based on your circumstances, you could come out a winner — or a loser.  

Do you know that if you sell your home and make a profit, the gain may not be taxable? That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

  1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.
  2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers.
  3. The most gain you can exclude as a single tax payer is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.
  4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. You also must report the sale if you receive Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.
  6. Generally, you can exclude the gain from the sale of your main home only once every two years.
  7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
  8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale.
  9. If you sell your main home at a loss, you can’t deduct it.
  10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.

Salmon Sims Thomas can guide you on the tax ramifications of selling your home and other personal tax matters. Please contact us if we can help.