Helpful Tax Tips for Home Sellers

Believe it or not, homes are still being sold and many of them are resulting in a gain for the home seller. For people fortunate enough to earn a profit when selling their home it’s essential you know the guidelines on deducting all or part of the gain from your annual income. The IRS.gov website offers helpful tips for people who have recently sold their home or are about to sell.

It’s important to consider these tips before or during the sale of your home. There is plenty of time before the official tax season begins, so do yourself a big favor and start getting the necessary information and preparing now.

Here are a few of the tips from the IRS:

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 cannot deduct a loss from the sale of your main home.
4. 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.
5. If you received the first-time homebuyer credit and within 36 months of the date of purchase, the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.