What You Need to Know About the Tax Matters When Selling Your House By Nick Stoles At Isnare.com Ezine Articles

Considering your tax matters isn’t exactly something that is on the top of your list when you are looking to sell your house. What’s first and foremost on your mind in this stage, other the huge fixation on the words “sell house”, is just how fast you can sell the house itself, and for how much. Taking into consideration the effect that taxes have on the actual sale often comes as an afterthought, and is often a lesson that tends to stick to people for a long time. With this in mind, it may be a good idea to first consider whatever it is that is sure to have an effect, whether profound or nearly insignificant, on the actual sale itself, since taxes seem to have this uncanny ability to balloon all of a sudden before you even have time to consider how you incurred it in the first place.

Tax matters involved in the sale of a house are many and myriad and it would take a considerable amount of time and understanding to fully appreciate all of them, so here is one of the most common and viable example of an important tax matter when you are starting to get into that “sell house” mode:

How long have you had the house?

If you have been living in the house for less than two years and you sell the house for a profit, the entire amount of your profit may very well be taxed. However, there is a chance you can avoid federal taxes by filing a claim for a reduced gain exclusion. To further help homeowners seeking to make a sale, the IRS has made it quite easy for people to qualify for this exclusion. The prime benefit of this is that the entire gain from the sale of the house may very well be sheltered from being categorized as a “premature sale”.

This reduced exclusion applies to instances wherein you are apparently making a premature sale due to the following conditions:

A premature sale by reason of change in place of employment – this is an automatic consideration, provided that it passes the distance requirement for consideration, which is that the new place of employment should at least be 50 miles away from the former residence, thus prompting a move to a nearer residence. Another automatic consideration that falls under the distance requirement is if the new place of employment requires that you be on call or be able to rush to the place of work in a short period of time.

A premature sale by reason of health matters – The new regulations state that those who may apply for the exclusion can do so if they have a need to move because of they have to obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of a disease, illness, of injury of a qualified individual. By qualified individual, the regulation means the owner, the spouse of the owner, and any co-owner of the house in question. This condition also includes if the qualified individual is selling the house because of a need to obtain or provide personal or medical care for a qualified individual who is suffering from any disease, illness, or injury.

A premature sale by reason of unforeseen circumstances – The new regulations will also take into consideration the fact that the sale of the house was because of the following unforeseen circumstances: a qualified individual dies, a qualified individual becomes eligible for unemployment compensation, a qualified individual experiences a change in status of employment or status of self-employment that results in the inability to pay for housing costs and basic living expenses, a qualified individual is divorced or legally separated, a qualified individual’s pregnancy results in multiple births, the residence is sold after being seized or condemned (such as by a government agency), and the residence is a casualty of a man-made disaster, an act of war, or an act of terrorism.

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