It is one of life’s necessary evils: in most situations, when a profit is made the government has the ability to place a tax on it. This rule also applies to home sales. However, I would like to let my clients in on a little secret. If you sell your home, you may NOT have to pay taxes after all! Keep these ten facts in mind if you plan to sell your home this year. They may save you some money!

1.Is this Your First Time Buying a Home? You May get a Credit:

With all the recent talk of millennials now becoming first-time homebuyers, I found this point especially interesting. If you claimed the first-time homebuyer credit when you bought your home, different rules may apply to the sale. Click here for more information.

2.Home Sold at a Loss:

If your home is sold at a loss that loss can’t be deducted on your tax return.

3.Exclusion of Gain:

This one is a biggie. If you meet certain eligibility tests, you may be able to exclude part or all of the gain from the sale of your home. Some of these criteria include your use and ownership of the home. For example, you must have owned and used the property as your main home for at least two out of the five years before home was officially sold.

4.Look Out for Exceptions:

Exceptions may apply in regards to ownership, use, and other rules. Such exceptions include those with a disability, certain members of the military, and certain government and Peace Corps workers. Refer to this page for more information.

5.Sale May Not Need to be Reported

Gains that are not taxable do not need to be reported to the IRS on your tax return.

6.But if You MUST Report the Sale…

You must report the sale on your tax return if all or part of the gain can’t be excluded. Additionally, the sale must be reported if you choose to not claim the exclusion or if you get Form 1099-S, Proceeds From Real Estate Transactions. Get more information from the IRS by clicking here.

7.Exclusion Limit:

The most gain that can be excluded from tax is $250,000, with the limit being $500,000 for joint returns. The Net Investment Income Tax does not apply to excluded gain.

8.Exclusion Frequency Limit:

Typically, gains from the sale of your main home may be excluded only once every two years. Some exceptions may apply.

9.Is it Your Main Home?

Only a main home qualifies for any potential exclusions of gain. If you own more than one home, your main home would be considered the one where you spend the most time.

10.Make Sure to Report Your Address Change

Once you have moved into your new home, you must update the address with the IRS using this form. Also remember to update your new address with the Health Insurance Marketplace if this is where you purchased your current health insurance plan.

Hopefully this has served as a helpful guide in your home sale journey! For any real estate inquiries, make sure to contact me today!