H&R Block Presents – THINKING OF SELLING YOUR HOME?
Need more room? Downsizing? Relocating? Want something different?
If you have been thinking about selling your residence, there’s good news where income tax is concerned. A home sale often doesn’t affect your taxes. If you have a loss on the sale, you can’t deduct it from income. But, if you make a profit, you can often exclude it. This is called “home sale exclusion”, or less commonly “sale of a personal residence exclusion”.
Current tax laws provide an exclusion of gain on the sale of your primary residence up to $250,000 or $500,000 if married filing a joint return. That means you can sell your residence for $250,000 (or $500,000) more than what it cost you to purchase or build and pay no tax on the sale! If your gain exceeds the excludable amount, the remaining taxable amount will be taxed as a long term capital gain which is usually a lower tax rate.
To qualify for the exclusion, you generally must have owned the property for at least 2 years and the property must have been your primary residence for 2 of the last 5 years prior to the sale.
The gain on the sale is determined by taking the gross selling price less your cost basis in the property. Cost basis is the total of the original acquisition cost plus improvements made during your ownership and plus many of the costs you incur to sell the property.
If you used a portion of your home for business or rental purposes during your ownership. This type of usage may affect your gain or loss calculations.
If you have questions about the tax impact of selling your residence and would like help from the Tax Professionals at H&R Block, please call 931-728-9462. H&R Block has your back in Manchester!