by Benny L. Kass
Courtesy Realty Times
If you have recently sold your house at a significant profit, and if you have not been keeping up with the tax laws, you will be pleasantly surprised. If you are married, if you meet the legal requirements described below, you can exclude up to $500,000 of the profit you have made. If you are not married, or file a separate tax return, the exclusion is reduced down to $250,000 of profit.
For many years, there were two tax concepts which helped save homeowners from paying a lot of capital gains tax: the "roll-over" and the "once in a lifetime." However, the Taxpayer Relief Act of 1997, signed by President Clinton on August 5, 1997, abolished both of these concepts. The roll-over and the once-in-a-lifetime exemption for homeowners over 55 years of age are real estate and tax history.
Although there are no restrictions on the number of times this exclusion can be used (as compared to the old "once-in-a-lifetime" approach) the law does contain two important conditions:
1. You must have owned and used the home as your principal residence for two out of five years before the house is sold. If you are married, so long as either spouse meets this requirement, the exclusion of gain applies. Marital status is determined on the date the house is sold. In the event of a divorce where one spouse is given ownership pursuant to a divorce decree or separation agreement, the use requirements will include any time that the former spouse actually owned the property before the transfer to the other spouse.
2. The exclusion is generally applicable once every two years. However, if you are unable to meet the two year ownership (and use) requirements because of a change in employment, health reasons or unforeseen circumstances (which have been defined by regulations promulgated by the IRS), then your exclusion is pro-rated. These pro-rations are complex, and have caused considerable confusion among lawyers, taxpayers and even the IRS.
Click Link for entire article: http://realtytimes.com/rtcpages/20060130_exclusions.htm
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You will be presented with:
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Its always in the details.
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GOT MORE QUESTIONS? NEED HELP SELLING YOUR HOME?
EMAIL: TLBautista@aol.comstyle="font-size:130%;color:#993399;"> for more info.
CALL ME: (make the last call you'll ever have to make to sell your home), at (818)521-3060.
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