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Ten Key Tax Facts about Home Sales (primary residence)

Posted by: Zaher Fallahi
Posted On: Aug 13, 2015

Ten Key Tax Facts about Home Sales (primary residence)

In most cases, gains from sale are taxable. However, if you sell your home, you may not have to pay taxes? Here are ten facts to keep in mind if you sell your home.

  1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your primary residence. This rule may apply if you meet the eligibility requirements. Parts of the test involve your ownership and use of the home. You must have owned and used it as your main home for at least 24 months out of the five years before the date of sale.
  2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules. One exception applies to individuals with a disability. Another applies to some members of the military. That rule includes certain government and Peace Corps workers. For more on this topic, see publication 523, Selling Your Home.
  3. Exclusion Limit.  The most gain you can exclude from tax is $250,000 for an individual taxpayer. And $500,000 for married filing jointly returns.
  4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report it to the IRS. Generally, this is reported on schedule D.
  5. When You Are Required to Report the Sale.  You must report the sale on your tax return on schedule d if you can’t exclude all or part of the gain. You must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds from Real Estate Transactions.
  6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home once every two years. There may be some exceptions to this rule.
  7. Only a Primary Residence Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.
  8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules, see Publication 523.
  9. Home Sold at a Loss.  If you sell your main home at a loss, tough luck, you can’t deduct the resulting loss on your tax return.
  10. Report Your Address Change.  After you sell your home and move to a new place, update your address with the IRS. To do this, file Form 8822. You can find the address to send it to in the form’s instructions on the 2nd Note. If you purchase health insurance policy through the Marketplace, you should notify the Marketplace when you move out of the area covered by your current Marketplace plan. In addition, you must report any changes in your family situating to the Marketplace, because this may affect your premium subsidy.

Zaher Fallahi, Tax Attorney, CPA, practices as Los Angeles Offshore Accounts Attorney and Orange Offshore Accounts Attorney, and assists taxpayers including Americans Living Abroad and Non-Resident Aliens subject to the US tax law, in resolving their tax problems regarding their Offshore Voluntary Disclosure Program (OVDP), Report of Foreign Bank and Financial Accounts (FBAR), Foreign Account Tax Compliance Act (FATCA) and Foreign Trust.  Telephones: (310) 719-1040 (Los Angeles), (714) 546-4272 (Orange County), e-mail taxattorney@zfcpa.com