Don’t forget the home sale exclusion is still in effect should you find yourself in the real estate market as the seller.

Since life brings about so many unplanned or planned changes, it’s important to remember all of the potential deductions or exclusions available to you as the taxpayer.

Qualifying individuals can exclude from income up to $250,000 ($500,000 for married filing jointly).

This exclusion can really be significant and make a great impact on a taxpayer’s bottom line.

There is no mandatory reinvestment requirements any more either. This means that a qualifying individual can take this gain tax free and pay down other debts, make improvements to a new home, save for retirement or just stock it away for other emergencies.

Generally, a qualifying individual has to meet the following requirements:

• The sold home must have been the taxpayer’s principle residence for at least two of the five years preceding the sale.

• The taxpayer should not have already used the two-year exclusion on another home within the same measurement period, as this disqualifies the individual from the exclusion.

There are limited exceptions related to the above requirements.

Lastly, keep in mind that there could be taxable consequences related to the gains that are not excluded under the above rule.

Be aware, too, that the new 3.8 percent Medicare tax could also apply to gains that are not excluded.

As with any crucial matter such as this one, seek professional guidance before making a decision.

 

Tim Byrd is a CPA with Silas Simmons LLP.