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The Gains of Selling Your Home When It Comes to Taxes

Jun 12, 2008
Most only think they get the tax break when they first purchase their home and they don't realize that their home can save them money at tax time when they sell it as well. So read on the learn the impact that your home can have on your taxes.

Are you ready or planning to sell your home? If you are, selling your home at a decent profit can put loads of money in your wallet. It can also lead to a reduced tax bill. Those who wait for the best deal to come around are not smart.

When you sell your house to make a profit, the first $250,000 can be taken away during tax season. Even better, if you are married and you file together with your husband or wife, the amount of money doubles. This a great gain for anyone!

However, be aware that there are in fact requirements when it comes to getting a tax break. You have to have lived in your home for two years out of the last five years. Usually this tax gain can only be used every two years which is great because many people do not move every two years. This is a requirement that many people have no problem with.

A change in a job might be something that causes someone to have to sell their home within two years of buying and living in it. People change jobs everyday and some have to relocate in order to have a decent commute to and from work everyday.

Another reason that may cause a person to leave their home prematurely could be health issues. Even though this is a very good reason, the IRS will require that proof of this from a physician in order to still get the tax break. You will need to keep a copy of this record for your records just in case on an audit.

Unfortunately, some people have to leave their homes because of events that cannot be predicted or stopped. For example, natural disasters, war, divorce, death, and terrorist attacks are all reasonable with the IRS as to why someone needs to claim an exclusion. As long as your specific circumstances meet the IRS', you are safe to file for exclusion.

No one wants to have anything bad happen to their home, however if any of these events to occur, it can be of great benefit to you on yr taxes that year. To determine the amount that you would be eligible to deduct you would divide the number of months that you lived in the house by 24. The result is then multiplied by the amount of the full exclusion you would have received. This leaves you with the total capital gain you can deduct from your taxable income.

Selling your home is most definitely able to lower your tax income when it comes time to file a return. If you are interested in exclusion, visit the IRS website and read about Tax Topic 701. It deals with selling homes.
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