Posts Tagged ‘home ownership advantages’

Are You Planning To Sell or Buy A Home???

Thursday, June 10th, 2021

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

In the past several months the prices for new or existing homes has increased non-linearly!  It seems as if everyone wants to take advantage of the situation.  You have probably already read or heard about others who have been caught unprepared.  They sold their existing home the same day that it came on the real estate market for more than the “Listed Price”, but they were unable to find a new home in their price range.  Now they’re “Renters” for an unplanned period of time.

In my opinion, a home provides three benefits to the owners – 1) an “investment” with tax advantages for mortgage interest & property taxes, 2) a place to live and enjoy for the owners, and 3) a place to enjoy and share great times with friends, family, business associates, etc.

In many or most cases, IF you meet the Federal requirements below, you can exclude up to $500,000 in the taxation of capital gains when you sell your home.  This is for married couples who file a joint income tax return.  Single taxpayers and married filing separately can exclude up to $250,000.  Accurate, written records are absolutely essential.

The formula to be used for reporting the sale in Schedule D (Capital Gains & Losses) of your tax return is:  Original Purchase Price + All Capital Improvements While You Owned The Home = Your Cost Basis.  Then the Selling Price Less your Cost Basis Less the Selling Costs = Your Capital Gain.  Keep all written records especially the Housing and Urban Development HUD-1 form. Capital Gains, if any, are taxable.  Capital Losses are not deductible, but they are reportable.

Contact either the title firm or the law firm that conducted the sale of your home.  Ask if you will receive a Federal Form 1099 S. (About Form 1099-S, Proceeds from Real Estate Transactions | Internal Revenue Service (irs.gov) ).  The financial information in your Schedule D must agree with the financial data in this form that has already been reported to the Internal Revenue Service!

(more…)