Have you recently sold your home? First off — congrats…that can be tough to do in this market! This post is going to cover some of the basics on the tax consequences of selling your home. These tips should cover most people’s situation, but if you have something that is more complicated (like, you rented out part of your main home, or used part of it as a home office), then I would suggest that you contact a tax professional. Hey — I just happen to know a really good CPA firm you may want to use….
OK here we go —
Some basics first — your house is considered a capital asset. Very simply, if you buy it for $100,000 and then sell it 5 years later for $150,000, you have a $50,000 long term capital gain. Normally, capital gains are taxable, but there are special rules when we are talking about your home.
- In general, you can exclude the gain from income from the sale of your house if you have owned and used your home as your main home for two out of the last five years.
- If you do have a gain from the sale of your main home, you can exclude up to $250,000 of the gain ($500,000 if you are married filing joint), in most cases.
- If in the last 2 years you sold a previous home and excluded the gain, you are not eligible for the full exclusion.
- If you can exclude all of the gain, you do not need to report the sale of your home on your tax return at all.
- If you can’t exclude all of the gain, then you need to report the sale of your home on Schedule D, Capital Gains and Losses.
- You can’t deduct a loss from the sale of your main home. Sorry — bummer.
- If you have more than one home, you can exclude a gain only from the sale of your main home.
- If you received the first time home buyer credit in an earlier year — you need to take a look at page 33 of Publication 523 (pdf) for directions.
For more information, take a look at Publication 523 (pdf) , Selling your Home. Most tax software is set up to handle the calculations involved with the sale of your main home. But, like I mentioned earlier — if you have any kind of complexity involved, it is worth it to consult a tax professional.