I am selling my home. Do I have to pay taxes on the price it is being purchased for?
First, you only pay income taxes on the “gain” not the whole purchase price.
Basically the gain is determined by the purchase price plus any capital improvement (additions, new roof, new kitchen, etc.) and expenses related to the original sale and paid for by you, subtracted from the monies you will receive for this sale.
You can exclude up to $250,000 of the gain—other than gain allocated to periods of nonqualified use—on the sale of your main home if all of the following are true:
• You meet the ownership test if you owned the home for at least two years.
The required two years of ownership and use during the five-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time.
• You meet the use test if you lived in the home as your main home for at least two years.
You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 times two) during the five-year period ending on the date of sale.
If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed.
You may be able to exclude up to $500,000 of the gain—other than gain allocated to periods of nonqualified use—on the sale of your main home if you are married and file a joint return and meet the requirements.
As always there are qualifications and exceptions.
Your best source of information will be IRS Publication 523 or visit IRS.gov online.
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Questions for Deborah Ritz can be e-mailed to The Weekly Adirondack at WeeklyADK@yahoo.com