Spring-to-fall is peak home selling season
Posted on June 4, 2019
Many homeowners are taking advantage of the recent upswing in housing prices and putting their homes up for sale this season. If that trend includes you, Teipen Selanders Poynter & Ayres has some good tax news for you. When filing your income taxes, you may qualify to exclude all or part of any gain from the sale from their income.
Here’s how to know if you qualify what you should consider when selling your home:
- To claim the exclusion, you must meet ownership and use guidelines established by the IRS. During a five-year period ending on the date of the sale, you must have owned the home and lived in it as your principle home for at least two years.
- If you sell your main home and have a gain from the sale, you may be able to exclude up to $250,000 of that gain from your income. Those who file a joint return with their spouse may be able to exclude up to $500,000.
- Homeowners excluding all the gain do not need to report the sale on their tax return.
What if you lose money on the sale of your home? If you experience a loss when your primary home residence sells for less than what you paid for it, unfortunately, according to the IRS, this loss is not deductible on your income taxes.
What if you have more than one home? If you own more than one home, you may only exclude the gain on the sale of your primary home. You must pay taxes on the gain from selling any other homes you own.
Taxpayers who don’t qualify to exclude all of the taxable gain from their income must report the gain from the sale of their home when they file their tax return. Anyone who chooses not to claim the exclusion must report the taxable gain on their tax return.
TSPA CPAs want you to know that if you receive Form 1099-S, you must report the sale of your home on your tax return even if you have no taxable gain.
What about mortgage debt and taxable income?
Surprising some people, TSPA CPAs note that you must report forgiven or canceled debt as income on your tax return. This includes those who had a mortgage workout, foreclosure, or other canceled mortgage debt on their home.
As with all IRS rules and regulations, there are exceptions, including persons with a disability, certain members of the military, intelligence community and Peace Corps workers.
If you are getting ready to sell or your primary residence, give our CPAs a call. We can help you figure out the adjusted basis of the home you’ve sold, the gain or loss on the sale, and the excluded gain on the sale – so you can close the year (and the sale) feeling confident of where you stand with the IRS.