| In May of 1997, the tax code governing
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| | unemployment compensation) and cannot
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| profit from the sale of a personal
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| | afford to keep the home.
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| residence was changed. In the past, any
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| | Â- A new job that is 50 miles further
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| gain from a home for sale could be taxed,
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| | away from the home than the current job.
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| unless rolled over into the purchase of a
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| | Otherwise, if you drove 20 miles to your
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| new home.
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| | current job, then the new job must be at
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| The new Internal Revenue Service rules
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| | least 70 miles from the home to qualify
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| are more advantageous to sellers of homes
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| | for an exemption.
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| for sale. You can no longer roll a gain
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| | Â- Your home was damaged from a natural
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| into the new home; however, not all gain
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| | or manmade disaster, and you were forced
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| is taxable as in the past.
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| | to sell it.
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| Now, homes for sale have the first
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| | Â- Perhaps an act of war or terrorism
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| $250,000 of profit exempt from any taxes,
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| | has caused the move.
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| if you are the owner and filing single
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| | Â- Even the birth of twins, triplets and
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| status. If you file jointly with your
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| | so on, made the current home for sale too
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| spouse, your homes for sale gain is tax
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| | small and impractical to keep.
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| exempt up to $500,000 - this is a
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| | IRS publication 523, "Selling Your Home",
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| half-million dollars, tax-free profit.
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| | covers many other unforeseen events that
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| This means that if you purchased a home
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| | would qualify you for an exemption.
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| for $200,000, you could sell it for
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| | When you do not meet the time and
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| $450,000 as a single or $700,000 as a
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| | resident test but qualify under one of
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| couple and incur no taxes on the profit.
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| | the unforeseen event exemptions, you
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| There is, however, a time and resident
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| | receive only a partial exemption for the
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| test that must be met in order to receive
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| | gain on your home for sale. You will be
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| this tax exemption for your homes for
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| | taxed on a pro-rated amount of the gain,
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| sale profit. You must have lived in the
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| | based upon how long you actually resided
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| home for two out of the past five years
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| | in the home.
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| in order to qualify for the tax
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| | If you lived there less than a year, then
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| exemption.
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| | the profit from your home for sale is
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| What If You Don't Meet the Time &
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| | considered to be a short-term gain. This
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| Resident Test
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| | means, on the pro-rated amount you owe
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| So, does that mean that if you do not
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| | taxes, you will pay the same tax rate as
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| meet the time and resident test you then
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| | you do on your 1040 income tax form.
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| owe taxes on all of the gain? Not
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| | If you have lived more than one year but
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| necessarily.
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| | less than two in your home for sale, the
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| The tax code allows for several specific
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| | profit is considered to be a long-term
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| exemptions to the time and resident test,
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| | gain. Rather than paying the generally
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| when you must move due to certain
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| | higher income tax rate, most people are
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| qualifying events. Here are a few of
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| | taxed at 15 percent. So, if you have
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| those events:
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| | lived in the home for less than one year,
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| Â- You must move due to the health of
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| | it is to your advantage to remain there
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| one of the residents in the home (your
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| | until you pass the one-year time mark -
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| immediate family) or the health of a
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| | if at all possible.
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| relative who is in your care.
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| | The changes in the tax code for profit on
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| Â- A death in your immediate family that
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| | homes for sale is much easier now to
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| incurs the move, such as a breadwinner
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| | calculate and typically are more
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| dies and the spouse cannot afford to keep
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| | advantageous to the seller now, than in
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| the home.
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| | the past. Of course before making any
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| Â- Divorce that forces a move.
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| | home selling decisions or plans, consult
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| Â- The unemployment of a breadwinner
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| | a Certified Public Accountant or other
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| (must be qualified for and receiving
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| | tax professional.
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