The tax implications of selling your primary residence can be significant and often complicated. Here are a few tips to consider before, during and after the sale:
- Planning in advance and exploring the tax ramifications for your individual circumstances is a very wise move.
- Consider contacting your tax professional for up-to-date advise on how a home sale will impact you.
- If you have owned and lived in the property as your primary residence for at least two out of the past five years, you may be able to exclude all or at least part of any gain from your income.
- Up to $250,000 of any gain can be excluded for an individual. For a joint return, that number is $500,000.
- The excluded gain discussed in # 4 is not subject to the Net Investment Income Tax. This tax goes into effect for the 2013 tax year.
- Generally, if all of the gain from a sale can be excluded, you do not have to report the sale on your return.
- If some of the gain cannot be excluded, you will need to report the sale of the home on your taxes.
- If you receive a Form 1099-S Proceeds From Real Estate Transaction, you will need to report the sale on your taxes. This form will also be received by the IRS and they will be looking for it on your return.
- If you have excluded a home within the past two years, you usually will not be able to exclude gain from the sale of a second home.
- Your primary home is generally considered to be the home in which you spend the most time no matter how many residences you own.
- Losses from the sale of a primary residence are not deductible on your tax returns.
Contact us at 916-576-7050 for assistance with planning for the sale of any residence or other property.