Tax Rules for Selling a Residence
|
The PositiveLights.org Web Site |
The Tax Relief Act of 1997 included a huge tax break for owners of highly appreciated homes who want to sell and move to a retirement home or to a smaller home. For sales after May 6, 1997, up to $250,000 of gain on the sale of a principal residence is tax free for single taxpayers and up to $500,000 for couples filing a joint return. This new rule replaces the previous rule that provided a one time tax free gain of up to $125,000 for the sale of a principal residence for taxpayers over the age of 55 and the tax free rollover of gain from one residence to another.
The new exclusion is available every two years. Sales prior to May 7, 1997 are not taken into account in determining whether a home has been sold in the past two years.
There are no age requirements any more. The main requirement is that the taxpayer must have owned and occupied the property as his or her principal residence for at least two of the five years preceding the sale of the home.
The $500,000 exclusion for married couples requires that both spouses must meet the use test but only one spouse needs to meet the ownership test. If only one spouse meets the use test, that spouse may still use the $250,000 exclusion.
The tax deferred roll-over of gain by re-investing the proceeds from one home in a home of equal or greater value is repealed.
If a home is sold for a gain of more than $250,000 ($500,000 for a married couple), the excess gain would be treated as a long term capital gain if the property was owned for more than 12 months.
Copyright, 2003, Vernon K. Jacobs
Vernon Jacobs is the Editor/Publisher of The International Wealth Protection Reports, which are a collection of research reports on legal methods of asset protection and tax avoidance. Further information on this subject is available at http://www.offshorepress.com/ Jacobs is a CPA who has worked as a free lance tax and financial author/editor since 1977. Details about his credentials and experience are online at http://www.offshorepress.com/vkjcpa/
|
|
|
|
|
About Long Term Care |
|
in the Support Community |
|
for Professional Caregivers |
|
GOOD NEWS For |
|
|
|
INFORMATION |
|
|
|
SPONSORS |
|
|
