You can avoid capital gains taxes on the sale of your home if it was your primary residence for at least two of the five years prior to its sale. Individuals may qualify for a $250K tax exemption, and married couples up to $500K.
If you've moved into your "forever home," and suddenly get laid off from your job, or need to move unexpectedly, you will not completely lose your exemption even though you couldn't remain in your home for two years.
Even the IRS understands unforeseen circumstances. Under Internal Revenue Code 121, you can get a partial credit for the time you've lived in your home.
Your exemption is based on the number of months that you remained in your principal residence. If you have to sell after 18 months, you will qualify for 18-24ths, or 75% of the total exemption.
The rules may seem complicated, but with the assistance of your tax adviser and a real estate professional, you can maximize your savings and locate your next home with a minimum of aggravation.
Saturday, February 17, 2007
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