Secrect to $500,000 (Married Filing Joint) Exclusion of Gain When Selling Your Primary Home

OK, you are ready to retire and you fully realize that selling your home and moving to a smaller retirement community, or not, you want to sale.  The upkeep is too great, the utility bill is much more than you can afford to spend, during your retirement years, plus you want to travel the world, and a big house is NOT in the picture.

This short list of ten tax tips for individuals selling their home, will help you to stay out of hot water with the IRS and reduce your tax liability if done correctly.

What the IRS forgot to explain in this famous top ten list, is there are conditions for excluding up to $500,000 (a half million dollars) of the gain from the sale of your home.  The conditions basically say that you must have lived in the home for two years, during the five year period before the sell of the home.  And, of course, you must have owned the home.

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The Internal Revenue Service has some important information for those who have sold or are about to sell their home. If you have a gain from the sale of your main home, you may be able to exclude all or part of that gain from your income.

Here are 10 tips from the IRS to keep in mind when selling your home.

1. In general, you are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the full exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

4. If you can exclude all of the gain, you do not need to report the sale of your home on your tax return.

5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.

6. You cannot deduct a loss from the sale of your main home.

7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude. Most tax software can also help with
this calculation.

8. If you have more than one home, you can exclude a gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

9. Special rules may apply when you sell a home for which you received the first-time homebuyer credit. See Publication 523, Selling Your Home, for details.

10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.  www.irs.gov

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The IRS leaves NOTHING to chance.  And if someone uses a tax loophole which they don't have a tax code for, guest what?  It is only a matter of having Congress vote on a new tax law!

Note:  If you have a summer home and you would like to sell it as well, we suggest that you retire, and live in the summer home for two years in order to qualify for the exclusion.  These are decision that would best be made with the help of your tax professional.  Cautious tax payers do not buy or sell ANYTHING, without checking with their tax professional first, because once you sign your name on the bottom line, you are held accountable for the tax liabilities which the transaction can create. www.taxeswilltravel.com