Sale of Principal Residence
The Internal Revenue Code allows qualifying persons an exclusion on the gain from their personal residence up to $500,000 for married tax payers filing a joint return and $250,000 for single return filers. This can be a source of cash for the individual to use for retirement, investing, or any purpose.
There is no limit to how many times a taxpayer can do this as long as the minimum use requirement is met.
Most homeowners don't take full advantage of all the adjustments in order to keep the gain as low as possible. If the truth were known, most people's records are so poor that when the time comes to recognize the gain, the calculations probably have to be based on estimates instead of actual numbers.
RULES FOR EXCLUSION
Effective date for sales of principal residence on or after May, 1997.
Ownership and use must have been the principal residence for two out of the five preceding years. There is a formula to provide partial exclusion for those who cannot satisfy the two year requirement.
Gain in excess of $500,000 or $250,000 amount is taxable at capital gains rate.
Exclusion does not apply to vacation or second home properties.
There is no requirement to rollover proceeds and reinvest them into another home. Homeowners have an option to trade up or trade down on a tax free basis.
For additional information, see the IRS Publication or see a tax professional. Form 2119 must be filed with your regular income tax return in the year of the sale.
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Jane Idzi specializes in the Park Cities and areas south of LBJ/635
including Lake Forest, Devonshire, Preston Hollow, and the
historical districts of M-Streets and Munger Place. She has earned
the coveted e-Pro Certification in addition to CCRC and Historic
Home Specialist and is a member of the Texas Association of
Realtors, the MetroTex Association of Realtors, Dallas Chamber of
Commerce and Dallas Network Connection.
She was voted a DMagazine's Dallas Top Realtor for 2005. Her website, www.idzi.com, boasts over 12,900 individual visitors a month and over 467,000 hits a month. She can be reached at 214-522-7997. |
