Thinking of Selling Your Home?
There could be a tax on that.... but you can avoid it!
Last month someone called and was on the verge of writing a five-figure check to the IRS because BOTH(!!!) her real estate agent and title company said she had to pay capital gains on the sale of her home. When you go to sell a house, you go to a realtor, not a CPA. When you have specific tax situations that involve thousands of dollars, you go to a CPA and not a realtor.
Thankfully, she called the morning she was about to drop a check in the mail to the IRS. In short, and thanks to incredible record keeping, she went from thinking she had to pay more than $50,000 in long term capital gains based upon that bad advice to $0. (Yes ZERO).
You will be exempt from capital gains on the sale of your home if you meet all three of the following conditions as described in IRS Publication 523:
You have lived in the home for at least 2 of the last 5 years before you sell it. The years you lived in the home do not need to be consecutive.
You have owned the home for at least 2 years.
You have not claimed a capital gains exemption from the sale of a home in the last two years. (i.e., this is not your second home sale within the last 2 years.)
You will be able to exclude $250,000 ($500,000 for married filing jointly) if each of the three conditions above are met. Additionally, improvements you made to your home during ownership add to your adjusted basis in your home. "Basis" is account-speak for what you paid for the home when you first purchased it. "Adjusted basis" (more account-speak) is all of the enhancements you made to the home since buying it. Enhancements could include a new roof, HVAC system, remodels & additions, new driveway, a pool - the list is endless.
If you sold a house during the last 3 years and think you paid capital gains on the sale, get in touch today for a free review and assessment. If you erroneously paid capital gains tax, we can file an amended return and get that money back in your pocket.
When it comes to selling your home, you NEED to work with a knowledgeable resource that knows the tax-code and is an expert in their field. Do not give the Government any free money. If you sold a house or are getting ready to sell a house in 2021, get in touch today.