Here are some helpful tips the IRS recently released. REMEMBER TO ALWAYS CONSULT A TAX PROFESSIONAL!
1. You may be eligible to exclude the gain from income on your property if you have owned and used your home as your main home for at least two years out of the five years prior to the date of the sale of your home.
2. If you have a profited from the sale of your primary residence, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).
3. BUT you may not be eligible for the exclusion if you excluded the gain from the sale of a different home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you are not required to report the sale on your tax returns.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your primary residence. This is important when considering a short sale.
7. Worksheets are included in Publication 523, Selling Your Home, to help you calculate the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude from your tax returns.
8. If you own more than one residence, you can exclude a gain only from the sale of your primary residence. You must pay tax on the gain from selling any other properties. (If you own two homes and live in both of them, your primary residence is the the one you live in most of the time).
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year’s tax return.
10. Always be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
For more information about selling your home, see IRS Publication 523, Selling Your Home.