This time of year, We always ask our clients the same question: Do you know how the capital gains from the sale of your primary residence will be taxed? It may seem like a simple question, but if you’re considering selling your home, we suggest you get familiar with how these tax rules operate.
Here are a few things to keep in mind as you move through the process.
Home for Sale
If you have a capital gain from the sale of your primary residence, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. To qualify for this exemption, however, you cannot have excluded the gain on the sale of another home within two years of this sale. This profit would be excluded from your taxable income. If you sold your home at a loss, unfortunately, you can’t deduct the loss. What’s important to remember is the sale of your home may be a taxable event.
Are there potential exceptions?
- Yes, if you received the house in a divorce settlement.
- Yes, if you are able to count short-term absences as time lived in the house.
- Yes, if a surviving spouse who has not remarried can count the time that the deceased spouse lived in the house.
A reduced exclusion may be available if you have a change in employment or health, or because of unforeseen circumstances, such as divorce. If you’re considering selling your home, let’s chat soon about what’s driving that decision.