Soar to Success April 2017

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If you’re about to list your home
for sale or maybe you just
sold your home, you may be
wondering if and how much tax
you might owe.
You may not always agree with
Uncle Sam’s rules but, in this case
I think you just might. If you are
selling your primary residence,
the IRS allows you to exclude the
profit you made or will make. In
most cases, you won’t even have
to report the sale on your taxes.
So, the hardest part about selling
your house just might be the
actual move itself.
While most will enjoy this
exclusion of the gain on the sale,
there are some cases where you
could have a reportable and
taxable transaction. So, how do
you know? You’ll first want to
look at the amount of time you
lived in the home. If you lived
in it as your primary residence
for 2 out of the last 5 years and
your gain is $250,000 or less,
you won’t have to report and
pay taxes on the sale. Also, that
amount increases to a $500,000
exclusion on the gain if you’re
married filing joint.
In order to calculate your profit,
you’ll take your selling price
minus your selling expenses. For
instance, if you paid $200,000
for your home and maybe you
remodeled your kitchen and
spent another $25,000, your
basis is $225,000. If you sell
your home for $300,000 and
incurred $4000 in selling costs,
there’s capital gain of $71,000.
As side note – if you sold a home
before 1997 and rolled the profit
from that sale into the home you
just sold, you’ll need to reduce
your basis by the amount of
the untaxed gain. So, using my
example, if you had $25,000 in
profit from the sale of a prior
home sold before 1997 your gain
on the sale of the new would
increase by the $25,000.
On the flip side of that coin, if
you sell a primary residence at
a loss, you won’t be allowed to
claim that loss on your income
taxes. Also, if you’re one of the
lucky ones and you do sell your
home and have a capital gain
above the exclusions, then you’ll
Do I Have to Pay Taxes
on the Sale of My Home?
Tax Planning for the Sale of Your Home
By Tina Moe, CPA
SOAR TO SUCCESS / April 2017 / Core Business Strategies