Please note the information below is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the receipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of the information provided below should not be acted upon without specific professional guidance. Please call us if you have any questions. 

 Amidst the meetings with real estate agents, evenings spent packing boxes, and hours invested in reading and signing contracts, it dawns on you: selling your house is going to affect your taxes. But how?

Under the home-sale exclusion rule, you may be able to exclude a portion, or possibly even all, of the gain realized from the sale of your home if your home meets the principal residence rules.

What does that mean for you?

If you're a single individual or a married individual filing separately, you could exclude up to $250,000 of the gain from your income taxes. If you're married, you file a joint return, and both you and your spouse satisfy the requirements, you could exclude up to $500,000.

How does it work?

To qualify, you must pass the "owned" and "used" tests: you must have owned your home for the five years prior to your sale date, and you must have used that home as your principal residence for at least two years, although not necessarily two consecutive years.

If you fail to meet these requirements due to a change in place of employment, health, or other unforeseen circumstances, you may still qualify for an exclusion at a fraction of your otherwise-qualified amount.

Is this a one-time deal?

No. You may use the exclusion more than once provided you and your spouse meet the eligibility requirements, but generally no more frequently than once every two years.

Special rules apply regarding ownership and use if you receive out-of-residence care, inherit property from a spouse, transfer property pursuant to a divorce, or dispose of property where the rollover rules applied. In addition, some exclusions do apply to the exclusion rule, so be sure to speak with an expert about how your home sale and history line up with the principal residence rules.

I have many years of experience helping individuals like you navigate the numerous tax laws that impact home sales. I welcome the opportunity to meet with you to evaluate your personal situation.