Former Rent - Taxes on sales of homes

If you are a homeowner, you will be entitled to tax relief when you sell your home. E 'can make up to $ 250,000 if you file taxes individually. If the file jointly, you could get $ 500,000. To make things even better, that nothing is owed to the IRS. There are some caveats involved. It must have been the owner of the property and must be used that same property as primary residence for at least 2 of the 5 years preceding the sale of the house. Although this looks good, what happened, if you sold your home after only two years for possession? In 2002, the IRS issued new regulations that have changed the original rules.

If you are in the position of owning and residing in the home for less than 2 years, you can avoid tax, saying the reduced gain exclusion. This is fairly easy to qualify for. If you qualify, the amount will probably be sufficient to protect the entire gain, even if the sale was made prematurely. If you are eligible, the amount would equal $ 250,000 or $ 500,000 times a fraction. The numerator of the fraction would be the period of time you have owned and used the house and the denominator would be the two years that is required. For example, if you and your spouse owned and lived in the house for 22 months, the exclusion would be reduced by $ 500,000 multiplied by 22 months over 24 months, which will amount to $ 458,333. The reduced exclusion applies when the sale is the result of a premature change of job, health problems or unforeseen circumstances.

If the sale is premature due to a change of job, you must say that this was the reason. This will make you eligible for the exclusion. To use this, you must have had to relocate more than 50 miles away from the house that was sold. There may be exceptions to this rule. It would depend on the circumstances. For example, if you have a new job working in the ER, and the work necessary to live near the hospital, you may still qualify for the exclusion even if the move was less than 50 miles away.

If prematurely sell the home for health reasons, there are requirements that must be met. The movement must be done in order to obtain medical care or to provide or facilitate care or treatment of a disease. The qualified individual could include yourself, your spouse or any other person who lived in the house that was sold. If a doctor recommends a change of residence because of health status of qualified persons, the exclusion will be granted immediately.

Unforeseen circumstances, may also be a reason for a premature sale. There are many things that might fall into this category, including the death of a person qualified, the eligibility for unemployment benefits, divorce or legal separation, pregnancy, multiple births, man-made disaster or if the residence is sold after being caught by a government agency. For cases of unforeseen circumstances, the qualified person may be the owner, co-owner or any other person who used the property as primary residence.

Additional tax treatments are available if you use your home for business or rental property. The entire house, including areas of rental and business will qualify for the exclusion of gain. The only difference here is that you must pay a tax on the gain if it were attributable to depreciation deductions that had been requested after May 1997. Keep in mind that the business or rental property must be within the main house.

As long as you meet the eligibility requirements, you can gain considerable tax savings when you sell your home. Sell ​​prematurely should be avoided, if possible, but if a situation does arise, you will not lose as much as you think .......