Did you know that you can avoid paying taxes on $250,000 of capital gains when you sell your house?
It's true -- you just have to meet a few requirements. Anyone planning to sell a primary residence in the near future should read up on the exciting new home-sale exclusion rules. You used to be able to exclude up to $125,000 of gain just once in your life, but you can now exclude up to a whopping $250,000 every few years.
If that isn't tantalizing enough, consider that married couples can exclude up to half a million dollars.
Here are some of the requirements:
- You, the seller, must have owned and lived in the home as your principal residence for at least two of the five years preceding the date of sale. The two years don't have to be consecutive, though.
- In most cases, you can take advantage of this home-sale exclusion only once during any two-year period.
- A married couple may exclude up to $500,000 of their home-sale gain if all of the following apply:
They file a joint return for the year of the home sale.
Either spouse owned the home for at least two years in the five-year period ending on the sale date.
Both spouses used the home as a principal residence for at least two years in the five-year period ending on the sale date.
Neither spouse had used the new exclusion on the sale of another residence within the two-year period ending on the date of the current home's sale.
Since this is such a big tax break, make sure you plan your home sale carefully to ensure that you qualify. Proper planning can save tens of thousands of tax dollars. And improper planning can cost you just as much.
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