| Property
Sale Gains and Losses and the IRS |
When
selling a home a couple can profit up to $500,000 on the
sale tax free over a five year period. This is a rolling
benefit over a five year period, which means that if you
profit $250,000 on the sale of a home you have lived in
for 3 years and another $250,000 on a home you've lived
in for the next two years, you have maxed out your benefit
for that five year period. The property needs to be the
principal residence. In order to get the maximum benefit,
you need to live in each home for a minimum of two years.
However, the amount can be pro-rated if you need to sell
your home in less than two years following the purchase.
There may be many reasons for this such as a new job requiring
you need to move or relocate.
The amount for a single person is $250,000. Again,
if you need to sell and move before the two year period
from sale is up, the benefit may be prorated e.g. if you
need to move after six months a couple can profit $125,000
tax free and a single person can profit $62,500.
You only need to report on a gain to the IRS once you
have reached the cap over the five-year period. It can
be reported on IRS Form 1040 Schedule D. For more information
on selling a home and the tax implications see IRS publication
523. You can use the following link:
www.irs.gov
to access IRS information and the forms.
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