How to Keep at Least $250,000 Tax-Free Dollars When You Sell Your Home

3 things you need to know about taxes.

Apr 6, 2014 at 1:00PM
Tax Season Financial Benefits

Over the past year, we have seen an increase of 10.4% on home prices nationally, according to Trulia's Price Monitor. We are seeing the beginnings of a robust recovery from the housing market crash of 2008- 2012.  Thus, if you have owned your home for more than seven years, it is possible that you may be seeing a small-to-significant increase in value of your home from your original purchase price.

That is great news for those planning to sell their homes!

Now that tax time is upon us, it is the perfect time to get cozy with the current tax rules, if you think you will be coming out ahead with some capital gains profit on your property.

Here are three you need to know now, according to

The Two-Year Primary Residence Tax Breaks

The issue of taxes boils down to this question: How long have you lived in your house?  If you've lived in your home for two years or more, and it's been your primary residence, you can pocket up to $500,000 tax-free dollars, upon the sale of your home. This assumes you have a spouse or partner with whom you file joint taxes. If you are single, then you can exempt half of that – $250,000 – from taxes.

If You Sell In Less Than Two Years But...You Move More Than 50 Miles Away

If you have to move because of work relocation, health reasons or certain unforeseen circumstances, you can pro-rate the taxes on your profit. That means you can keep 25%, 50% or even 75% of your profit, tax-free, depending on how long you have owned your house—as long as it has been your primary residence.

One Very Important Number: 366 Days

If you sell on day 366, which is one year and one day after buying, you pay significantly less capital gains tax than if you sell on day 365. That's because at the one year and one day point, your profit is subject to long-term capital gains—not short-term. Uncle Sam rewards those who hold on to their investments for at least one year by lowering the percentage you have to pay in tax. If you sell within a year, you're taxed at a much higher rate.

 If this at all sounds confusing, I highly recommend asking a tax advisor for help in understanding your tax obligations upon the sale of your home. But basically, unless you sell and have a capital gains equal to or greater than $250,000 (for a single person) or $500,000 (for a couple), then you won't have to pony up for a capital gains tax bill. You fall within the safety net the government gives us now to protect your increased house value.

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Michael Corbett is Trulia's real estate and lifestyle expert. He hosts NBC's EXTRA's Mansions and Millionaires. In additional to his regular segments on ABC's The View and Fox News, he is a national best selling author with three critically acclaimed real estate books: Find It, Fix It, FLIP IT!; Ready, Set, SOLD! and Before You BUY! Follow him on Twitter @1MichaelCorbett

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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