Ten Tax Tips for Individuals Selling Their Home

The IRS has offered a set of tips for homeowners to keep in mind as they prepare to sell their homes during 2013. The first tip notes that when someone sells their home for a profit, they may not have to report part, or even all, of that profit as income if they owned the property and used it as their main residence for at least two of the five years prior to the date of sale. Normally, the amount that can be exclude on a single person’s tax return is no more than $250,000, while joint returns can exclude up to $500,000, and this gain is not subject to the Net Investment Income Tax, which became effective in 2013. The IRS noted that if all the gain from selling the home can be excluded this way, then the sale of the home does not need to be reported on the owner’s tax return. However, the sale must be reported if the selling owner can’t exclude all of the profit, does not decide to exclude it, or if that individual received a Form 1099-S, Proceeds From Real Estate Transactions. The IRS also recommends that people use the e-file software to prepare and file their 2013 tax return in 2014, but suggests that those who wish to prepare a paper return should use the Selling Your Home worksheets in Publication 523 to help them determine what the gain or loss was on the sale and how much can be excluded, though the agency adds that losses cannot be deducted. The agency noted that a gain from the sale of a main home can generally only be excluded once per a two-year period, and that only gains on the sale of a main home can be excluded, owners have to pay the taxes on any gain made form the sale of another home. In addition, there details on the special rules that might apply when a homeowner sells a home which they received the first-time homebuyer credit for in Publication 523. Lastly, the IRS reminds homeowners to update their address with the IRS and the U.S. Postal Service when they sell their home. | Read More