Tax Relief - On Home Sale
When Sally and John got married, they both had a house of their own.
Living together they felt no need of keeping two houses, as they were in two states and it was difficult to manage both homes.
They decided to sell one of the properties and it did fetch an amount which was more than their expectation, but then with that came tax liabilities.
Selling your home can be a profitable event, particularly if you have made investment in property early on before the real estate boom.
But the bumper profits may bring with it tax worries.
No need to worry.
The law provides tax relief on sale of home provided certain conditions are met.
The first condition is that the house in your question should have been owned by you for at least two years.
The second condition is that it should have also been used by you as your main home for two years.
If you have more than one home, the tax relief is for the main home and not the less frequently used home.
In the case of joint returns, however, this user test gets relaxed somewhat in as much as either you or your spouse should have used it as your main home and it is not necessary for both of you to pass the user test to get tax relief.
The exclusion is also higher for joint returns at $250,000 than for an individual who gets exemption for only half the amount.
If the exemption amount looks small to you, take heart in the fact that you can avail of this tax relief as many times as you sell your home provided, of course, you meet the ownership and user test each time.
Living together they felt no need of keeping two houses, as they were in two states and it was difficult to manage both homes.
They decided to sell one of the properties and it did fetch an amount which was more than their expectation, but then with that came tax liabilities.
Selling your home can be a profitable event, particularly if you have made investment in property early on before the real estate boom.
But the bumper profits may bring with it tax worries.
No need to worry.
The law provides tax relief on sale of home provided certain conditions are met.
The first condition is that the house in your question should have been owned by you for at least two years.
The second condition is that it should have also been used by you as your main home for two years.
If you have more than one home, the tax relief is for the main home and not the less frequently used home.
In the case of joint returns, however, this user test gets relaxed somewhat in as much as either you or your spouse should have used it as your main home and it is not necessary for both of you to pass the user test to get tax relief.
The exclusion is also higher for joint returns at $250,000 than for an individual who gets exemption for only half the amount.
If the exemption amount looks small to you, take heart in the fact that you can avail of this tax relief as many times as you sell your home provided, of course, you meet the ownership and user test each time.
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