Tax tips for home sellers (and would-be sellers)
If you're selling your home, you're probably not thinking of the income-tax implications just yet -- April 15 seems so far away. But it's always best to be forewarned.
Owings Mills-based accounting firm Glass Jacobson is offering some tips to that effect, including these:
1. Generally, you are eligible to exclude the gain from income if you have owned and used the home as your MAIN RESIDENCE for two out of the last five years prior to the date of its sale.2. If you have a gain from the sales of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the 2 year period prior the sale.
You'll find all the tips here.
In case you're wondering: If you sell your primary residence at a loss, you can't deduct that from your taxes, Glass Jacobson says. Sorry, folks.
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Comments
What happens if you are underwater and sell your home for less than you owe and have to bring money to the table? It there any tax benefit?
Posted by: jaded | August 30, 2011 10:52 AM
jaded, I think that's the category covered by the "you can't deduct" tip. Here's a SmartMoney article from '07 on that subject: http://www.smartmoney.com/taxes/income/taxes-when-you-sell-your-home-at-a-loss-21058
Posted by: Jamie Smith Hopkins | August 30, 2011 11:00 AM
Sorry Jamie. I responded before reading the entire original posting. Oops!
Posted by: Jaded | August 30, 2011 12:45 PM
I see! I thought you were wondering if there was a tax difference between a short sale and an underwater transaction that isn't a short sale.
Posted by: Jamie Smith Hopkins | August 30, 2011 12:50 PM
Jamie, a little off topic, but may be a good nugget for readers, me included, but what if you are renting out your home for a few years and still sell at a loss? Is that loss tax deductable since the property is now classified as a rental?
Posted by: M | September 6, 2011 10:05 AM
M, I think I've read that this sort of loss is tax deductible, though the IRS would probably dig deeper if the landlord hadn't been reporting rental income and losses in previous tax years. I'll keep an eye out for someone who could do a real estate tax Q&A.
Posted by: Jamie Smith Hopkins | September 6, 2011 10:47 AM