Tax Implications of Selling a Home
Selling your home always comes with added extra considerations that you may, or may not have been aware of before you started the selling process. One major consideration that is sometimes overlooked by sellers is the tax implications of selling your home.
It is a good idea to look into how selling your home will affect your tax returns and also what you are entitled to. Check with your tax consultant to determine what factors may affect the taxes resulting from the sale of your home.
Although your tax consultant will be able to give you a more complete picture of the tax arena some important points to remember when selling a home are that your taxes can be effected by any number of things.
Determining Taxes
Whether you purchased the home or acquired it by gift or inheritance will make a huge difference in how the government views your tax entitlement. Also hugely influential in determining the tax you pay are whether you used your home partly for business or rental and the costs associated with selling your home.
Home improvements, additions, and other similar procedures that may help to offset capital gains can also influence the tax, as can the gain from the sale of a previous home, on which tax was postponed prior to the enactment of the federal Taxpayer Relief Act of 1997.
The federal Taxpayer Relief Act is also worth discussing with your tax consultant as it entitles you to keep, tax free, capital gains of up to $500,000 for married couples jointly filing, or $250,000 for single taxpayers, or married taxpayers who file separately. To qualify for the exclusion, you must have used the home as your principle residence for at least two of the prior five years.
