HOME SALE TAX BREAK

By Robin Shapiro

If you sell your home and have a long-term capital gain, then you may be able to exclude up to $250k of the gain (or $500k for married couples) from your tax return. There are provisos: the home must have been your primary residence for at least two of the previous five years, and you must not have used this exclusion during the past two years. Theoretically, you can do this every two years, if you are fortunate enough to buy a home (live in it) and flip it for a profit.

The IRS does provide an exemption to the two year rules for use and ownership if the reason for the sale is health, place of employment, etc.

The capital gain is computed by subtracting closing costs, original purchase price, and the cost of improvements from your selling price. The long-term capital gain tax rate usually runs from 0% to 15% depending on your income. It can even reach 20% or a bit higher. Check with your accountant. Home improvements are usually considered to be items like new plumbing, wiring, or anything which adds value. Things which prolong the useful life of the home are appropriate. Call me. Love, Robin