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Homes For Sale

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



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