The Gain From The Sale Of Your Main Home

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Written by Milton Boothe | Posted in Income Tax • Tax Education • Tax Payments • Tax Planning • Tax Tips

If you sold your home during the year and made a gain, you may be able to exclude all of that gain from your taxable income. To qualify for this tax benefit, the home sold must have been your principal residence. You can exclude from your taxable income, the gain from the sale of your main home, of up to $250,000 ($500,000 if filing a joint return). To qualify for this exclusion, however, all of the following must be true:

• You owned the home for at least 2 of the last 5 years (the ownership test).
• You lived in the home as your main home for at least 2 of the last 5 years (the use test).
• You did not exclude gain from the sale of another home during the 2-year period ending on the date of the sale.

If you are married, you can exclude up to $500,000 of the gain, but all of the following must be true:

• You filed a joint return with your spouse.
• Either you or your spouse meets the ownership test.
• Both you and your spouse meet the use test.
• Neither of you excluded gain from the sale of another home during the 2-year period ending on the date of the sale.

If one spouse dies, the surviving spouse may qualify to exclude up to $500,000 of any gain from the sale or exchange of his or her main home. To qualify for the exclusion, the surviving spouse must not remarry, must meet all the requirements for exclusion, and the sale must take place within two years after the date of the death of the spouse.
If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain realized from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.
You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income, but you must meet the ownership and use tests. You can exclude any gain up to $250,000; however, you cannot exclude the part of the gain equal to the depreciation you claimed for renting the house.
The primary objective of these articles is to empower you with basic income tax knowledge, which would enable you to do your own taxes, if you so desire. For comprehensive guidance on how to report your income, and on how to claim ALL your tax credits and deductions, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3,” on TaxConnections.com

Milton Boothe

Milton G Boothe is an IRS Enrolled Agent with over twenty years of tax and financial accounting experience, including several years at PricewaterhouseCoopers. He is also a British certified Chartered Accountant. He is currently employed in private tax practices where he helps people resolve their tax problems, minimize their taxes, and routinely represents the interests of taxpayers before the Internal Revenue Service. As an Enrolled Agent (EA) Boothe is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals.
Milton G Boothe is also the author of several tax publications, wherein he encourages people to empower themselves by learning to do their own taxes.