Selling your home can be a bittersweet feeling. While it may be hard to say goodbye to a place that holds so many memories, there is a tax benefit that makes the separation easier. Your profits may be tax-free.
As long as you’ve owned and lived in your
home for two of the last five years, up to $250,000 ($500,000 if married filing joint) of your profit is tax-free when you sell your home. The time doesn’t even have to be continuous for you to qualify. The catch is you can only exclude the profits from the sale of your home once every two years.
Only your main home qualifies
Although you may be lucky enough to own multiple properties, you can only exclude the profits on the sale of your primary residence.
You don’t have to report the sale of your home on your tax return unless you receive a Form 1099-S, Proceeds from Real Estate Transactions from the closing agent. ezTaxReturn supports 1099-S entries and is the quick and easy way to prepare your return.
First-time Homebuyer Credit
Special rules apply to individuals who claimed the first-time homebuyer credit when they purchased their home. If you bought your home in 2008, you’ll have to repay the credit. If you bought your home in 2009 or 2010, you don’t have to repay the credit unless you sold or gave up ownership within 36 months of purchase.
Losses cannot be deducted
In some cases, you may owe more than what the house is worth. If you sell your home for a loss, the loss cannot be deducted on your tax return.
Premium Tax Credit
Don’t forget, if you purchased coverage from the Health Insurance Marketplace and receive advance payments of the premium tax credit, you need to inform them of your move. This will prevent you from receiving too much financial assistance and owing money on your tax return.