Home Selling - How it Effects Taxes
Some people think that they will only receive a tax break from their house when they buy it, but selling it provides another tax deduction and thus has a good effect on your taxes.
If you are interested in selling your home, you should wait to sell until you get the best possible offer.
The higher your profit the more you will save on your taxes.
The first $250,000 in profit that you earn when you sell you home is not included in your taxes.
This figure is $500,000 when a married couple who files jointly sells their home.
Your situation must meet certain criteria in order to receive this tax break.
First of all, you need to have lived in the home that was sold as your primary residence for a minimum of two or the last five years.
Since the average person does not move more often than once each two years, most people are able to obtain a tax break with the sale of their home.
Of course, certain situations cause people to sell their homes before they have lived in them for two years.
For instance, if someone's job changes and they have to move quickly or they find a new job with a company in another area they may need to move before two years have passed.
People also have to move quickly and unexpectedly because of health problems.
If this is the reason for selling a home before having lived there for two years the IRS will still give you a tax break as long as you can prove by means of a doctor that the move is directly related to a medical condition.
A letter from a doctor is important to keep in your records to prove that your tax break was well founded if you are ever audited.
Natural disasters also force people to move.
Selling your home and moving because of a natural disaster is another exception to the IRS's two year rule.
Unforeseen occurrences such as natural disasters, divorce, death, multiple births, spousal separation, war, and terrorist attacks are reasons for the IRS to grant you the home selling tax break before you have lived in the home for two years.
The above mentioned exceptions will give you a tax break but it will not be equal to that which you would receive if you had lived in the home for the entire two years.
To figure out the size of your tax break, divide the number of months that you have lived in the home by 24 and multiply the answer by the amount of the deduction you would have been given if you had lived in your home for two years.
That figure can be deducted from your taxable income.
Selling your home can lower your taxable income and thus save you money on taxes.
More details on this subject are available on the IRS's website under Tax Topic 701.
If you are interested in selling your home, you should wait to sell until you get the best possible offer.
The higher your profit the more you will save on your taxes.
The first $250,000 in profit that you earn when you sell you home is not included in your taxes.
This figure is $500,000 when a married couple who files jointly sells their home.
Your situation must meet certain criteria in order to receive this tax break.
First of all, you need to have lived in the home that was sold as your primary residence for a minimum of two or the last five years.
Since the average person does not move more often than once each two years, most people are able to obtain a tax break with the sale of their home.
Of course, certain situations cause people to sell their homes before they have lived in them for two years.
For instance, if someone's job changes and they have to move quickly or they find a new job with a company in another area they may need to move before two years have passed.
People also have to move quickly and unexpectedly because of health problems.
If this is the reason for selling a home before having lived there for two years the IRS will still give you a tax break as long as you can prove by means of a doctor that the move is directly related to a medical condition.
A letter from a doctor is important to keep in your records to prove that your tax break was well founded if you are ever audited.
Natural disasters also force people to move.
Selling your home and moving because of a natural disaster is another exception to the IRS's two year rule.
Unforeseen occurrences such as natural disasters, divorce, death, multiple births, spousal separation, war, and terrorist attacks are reasons for the IRS to grant you the home selling tax break before you have lived in the home for two years.
The above mentioned exceptions will give you a tax break but it will not be equal to that which you would receive if you had lived in the home for the entire two years.
To figure out the size of your tax break, divide the number of months that you have lived in the home by 24 and multiply the answer by the amount of the deduction you would have been given if you had lived in your home for two years.
That figure can be deducted from your taxable income.
Selling your home can lower your taxable income and thus save you money on taxes.
More details on this subject are available on the IRS's website under Tax Topic 701.
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