Jul 22

Residential Property Sell (July-2022)

This month I want to discuss the aspects of selling your main home.  Are you aware you may qualify to exclude all or part of any gain from the sale?  Well, you need consider the following facts to determine how much is excluded.  You are required to have ownership and use of it as your primary residence, for at least 2 years out of the last five-year period.  So, how much of the gain are you able to exclude?  The amount is up $250,000 for single filers, and up to $500,000 for married filing joint filers, without having to reinvestment into another home.  Taxpayers who are permitted to exclude all their gain does not need to report the sale on their tax return, unless a Form 1099-S was issued.  Taxpayers who don’t qualify to exclude all of the taxable gain from their income, must report the gain from the sale of their home when they file their tax return and anyone who chooses not to claim the exclusion, must report the taxable gain on their tax return using Form 8949 and Schedule D.  Also, taxpayers who receive Form 1099-S, Proceeds from Real Estate Transactions, must report the sale on their tax return, even if they have no taxable gain, and follow the procedure to exclude the taxable gain, if so permitted.  Now, what if you have a loss?  A loss is when your main home sells for less than your basis and this is not deductible.  What is basis?  This is the purchase price of the home and land, some of the purchase closing cost, major improvements and repairs, and some of the closing costs on the sell.  This basis is subtracted from the selling price to arrive at your gain.  Oh, your original loan, refinancing, and home equity loans are not part of the equation to determine the gain or loss on the sell of the residence.  Remember, taxpayers who own more than one home, can only exclude the gain on the sale of their main home where they have lived two of the last five years.  Any other home sells will be taxable.  Next, what if you didn’t live in this home two out of the last five years?  Well, you are permitted take a proportionate part of the two-year period.  Let’s say you lived in the home exactly one year out of the last five.  Then you would be permitted to take a 50% exclusion of the gain.  In other words, 365 days divided by 730 days equates to 50%.  It’s the number of days as your primary residence, divided by 730 days, to arrive at the correct excluded percentage.  What if you bought and sold more than one main home within the five-year period?  Call your tax advisor!  There are other exceptions to what I have stated in this brief overview for taxpayers with disabilities, certain members of the military, intelligence community, Peace Corps workers, and natural disasters.  Again, if you fall within one of these exceptions, you’ll need to consult your tax advisor.  For additional information you can review Publication 523, Selling Your Home.  Last, I hope everyone enjoyed the 4th of July Fireworks, Thunder Over the Indian River!!! We appreciate the opportunity to be a prime sponsor and I want to thank the Port St. John Community Foundation, Inc. members for their efforts making our community one of the best to live in.  Especially, Randy Rodriguez, Supreme Pyromaniac.  Be sure to let him know!  This is a very brief overview.  Additional details and specific assistance in applying the general information in this article may be attained by contacting your tax advisor or our office.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.