Selling Your Home? 8 Key Points on Rules and Capital Gains Options
Selling Your Home? 8 Key Points on Rules and Capital Gains Options
Selling your home can be an exciting but complex financial decision. While the sale price may be enticing, it’s important to understand the rules and tax implications that come with it. One of the biggest concerns for homeowners is capital gains tax. I have had multiple conversations with clients who are unclear how capital gains are determined and how they can reduce their tax obligation. Here are eight essential points to keep in mind when selling your home and how to navigate capital gains considerations effectively.
1. Understanding Capital Gains Tax on Home Sales
2. The Primary Residence Exclusion
One of the most significant tax breaks available is the primary residence exclusion. If you have lived in the home as your main residence for at least two of the last five years before selling, you may exclude up to $250,000 of gain for single filers and $500,000 for married couples filing jointly from capital gains tax.
3. Eligibility for the Exclusion
- Ownership Test: You must have owned the home for at least two years within the past five years.
- Use Test: You must have used the home as your primary residence for at least two of the past five years (does not need to be consecutive).
4. Partial Exclusion for Special Circumstances
5. Capital Gains for Investment or Rental Properties
6. 1031 Exchange for Investment Properties
7. Improvements That Reduce Capital Gains Tax
8. State Taxes and Other Considerations
Thinking About Selling?
Written by Shannon Miller with the Weinland Team at RE/MAX Alliance
Phone: (970) 818-8895
Email: Shannon@TheWeinlandTeam.com
Written by fortcollinsexperience
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