Explaining a simple capital gains tax exemption that can save you money.
Sellers, do you want to keep more of your money? Most people reach a point in their lives where they decide to downsize, but some are afraid of capital gains tax. Luckily, there’s a simple exemption that can save you money.
“The home must have been your primary residence for at least two of the last five years.”
Please keep in mind that I’m not a CPA or lawyer. I’m only sharing common knowledge, so you should talk to your tax professional for a more detailed explanation.
The first step to getting the exemption is passing the ownership use test. In other words, the home you’re selling must have been your primary residence for at least two of the last five years. You also can’t have sold another primary residence during that period.
You’ll have to report the sale using a 1099-S form. You need to report the gain, even if it is an exemptable amount. If you go over the exemptable amount, you still have to report the gain.
What is the exemption amount? If you’re single, it is $250,000. If you’re married, that figure doubles to $500,000.
This exemption is an awesome way to save money on your home sale. If you have questions about your taxes, please reach out to your CPA. If you have any questions about real estate, give me a call at (800) 722-2585. I’d love to help.
