Isnare Free Articles
Authors Contents [Add OpenSearch]
Distribute your articles to more than 6,000+ sites and 40,000+ email group publisher subscribers for as low as $2 / article...
Index  Article Directory  Real Estate
Embed this Article  
Robert D. Cavanaugh, CLU

Robert D. Cavanaugh, CLU x 27 articles

Liked the article? Consider buying me a beer!
$

Most Recent Videos Most Recent Videos

A single person can exclude up to $250,000 of the gain from the sale of their home and a married couple up to $500,000. However, there are qualifications, rules, exceptions to the rules and special situations. This article outlines the major rules and clears up many misunderstandings.

First, you must meet two tests: the ownership test and the use test.

The Ownership Test

This test requires ownership of the property for at least two of the five years prior to the sale. The ownership does not have to be continuous.

The Use Test

The use test requires that you lived in the home as your principal residence for 2 years during the 5 years preceding the sale. Again, the 2 years do not have to continuous. Short temporary absences, such as vacations or spending a couple or months in the summer at the lake, are periods of use. Even if you rent out your home while you are gone, there is no interruption in your period of use.

The periods used to satisfy both of these tests do not have to be the same. In addition, members of the Armed Services or Foreign Services can choose to suspend these tests for any period they or their spouse is on "qualified official extended duty". If people become mentally or physically unable to care for themselves or have to go into a nursing home, the two-year use requirement shortens to one year. Therefore, it is possible to qualify without actually living in the home for the required two years.

For people who have lost their homes to hurricanes, floods, tornadoes and other natural disasters, or have had them condemned, a special rule applies. They can add the time they lived in the home destroyed or condemned to the time they have lived in the home on which they want to exclude gain.

What is a Home?

A home, for capital gain exclusion purposes, must be your "main" home. It could be a house, houseboat, mobile home, co-op apartment or condominium. Note that if you sell the land on which your home is located, you cannot exclude the gain from the sale of the land. An example would be selling the land on which your mobile home sets, buying another piece of property and moving your mobile home to the new location.

If you own a vacant lot next to your home and sell it as part of your home sale, special rules apply. If you own a home in the city and a cabin in the mountains, the home where you spend the most time is the one where the tax exclusion applies. There are at least nine tests used to determine your main home if you own more than one.

The Exclusion

First, you must meet the ownership and use tests, or fall under one of the exceptions, and have not used the exclusion on the sale of another home within two years of the current sale.

If you are single, you can exclude up to $250,000 of the gain on a sale. If you own the home jointly with someone else, and each of you files single returns, each can exclude up to $250,000 of their interest in the home.

If you are married and file a joint return, you can exclude up to $500,000. However, you must meet one of several conditions. Either you or your spouse must meet the ownership test. Both you and your spouse must meet the use test. During the two years preceding the current sale, neither of you excluded gain from the sale of another home.

If your spouse dies, and you do not remarry before the sale, you can count the time your spouse owned and lived in the home to satisfy the ownership and use tests.

In today’s society, many scenarios require careful adherence to the rules. For example, a single woman sells her home and remarries a man who owns a home. They decide to sell. Another common example: Mary and John are single and each owns a home. They marry and decide to sell each of their homes and buy another. Here is another: Janet receives the home as part of a divorce settlement and later decides to sell.

The Partial Exclusion

Even if you do not meet the ownership and use tests, it still may be possible to claim a partial exclusion under certain circumstances.

If you have to sell your home because of a change in employment, your home sale could qualify under a "safe harbor." The rules contain many tests to determine if the safe harbor applies.

If the primary reason you have to sell your home is health-related, you could qualify for a partial exclusion. The health issue applies not only to you, but also to a large list of people classified as your extended family.

Unforeseen circumstances also qualify for a partial exclusion. These include an involuntary conversion of your home, man-made or natural disasters, death, unemployment, a change in employment status, divorce and multiple births.

I hope you have seen that applying what you may think the rules are to the sale of your home may not be as simple as you thought. With all the rules and exceptions, it would be prudent to solicit the advice of an accountant, tax attorney or real estate professional prior to listing your home.

Rate this article:
Robert D. Cavanaugh, CLU is a 36-year financial and estate planning veteran and author of the free newsletter, "The Estate Preservation Advisor". For cutting-edge, easy-to-understand financial planning resources and techniques to increase your income, reduce taxes and preserve your estate, go to http://theestatepreservationadvisor.com/freevideo.htm
Important NoticeDISCLAIMER: All information, content, and data in this article are sole opinions and/or findings of the individual user or organization that registered and submitted this article at Isnare.com without any fee. The article is strictly for educational or entertainment purposes only and should not be used in any way, implemented or applied without consultation from a professional. We at Isnare.com do not, in anyway, contribute or include our own findings, facts and opinions in any articles presented in this site. Publishing this article does not constitute Isnare.com's support or sponsorship for this article. Isnare.com is an article publishing service. Please read our Terms of Service for more information.

Most Recent Articles

Kitchen Decoration Process

An Article by Hasan Sarker in Home Management

6 hours ago

The kitchen is not a simple stack of cabinets, hoods, stoves and electrical appliances, but is combined with the whole kitchen environment to create a pleasant and enjoyable living space. But the face of the kitchen decoration is a lot of people can start, just hydropower transformation of this one problem can be stumped a lot of heroes, so a clear and practical kitchen renovation Raiders is even more important...

How to Find Best Contractor Payroll Management Solution in Australia

An Article by Tristan T in Business Management

9 hours ago

Now-a-day, every organization has its own unique set of head - Basic salary, Allowances, and Reimbursements. In addition to these there are sometimes variable earnings, and deductions in payroll. Additionally, there could be out of payroll payments that need to be paid once in a while. Then there is the concept of benefits which could be in or out of payroll too...

How Audio Books Can Help You in Your Workout

An Article by Jawed Smith in Computers and Technology

1 day ago

There's no doubt about it. Audio books have made life a lot much easier. For those people who want to exercise to remain in excellent shape, audio books can assist us to accomplish this with less tension. Normally people think audio books are very expensive or very monotonous. That's not actually true...

RevenueHits Review Earne – Make $800 Per Month

An Article by Sabrina Akter in Travel

1 day ago

earneRefresh: There's a mid year promo that you should exploit at the present time. In the event that you join BEFORE July fifteenth 2017 and begin acquiring with Revenuehits you will get an additional reward. Here are the terms:• A new Publisher who will – join to RevenueHits, utilize the stage for a time of 1 month and reach no less than 1000 USD in Revenues – will be remunerated with 100 USD Sign-Up Bonus;• A new Publisher who will – join to RevenueHits...

Omega De Ville Prestige Co-Axial Chronometer Automatic Power Reserve 424.20.37.20.02.001 Men’s Watch| a Classic Returns in a Modern Disguise

An Article by Jason Ca in Entertainment

2 days ago

The bottom line:The Omega De Ville Prestige Co-Axial Chronometer Automatic Power Reserve 424. 20. 37. 20. 02. 001 Men’s Watch mixes olden looks to a new design and offers a lot to enjoy. Its noticeable quirkiness is way apart from what you usually find in the mainstream brands and is free from the unnecessary conservatism...

What Are the Benefits of Aluminium Shutters?

An Article by JOSEPH ZAMMIT in Home Management

2 days ago

Aluminium is a strong and durable material that is ideally suited to external applications. It does not warp or become brittle like wood, it does not rust like iron and is perfectly suited to the harsh Australian weather conditions. It therefore follows that aluminium shutters are the best window covering option for your home...

2017 NS0-191 Dumps NCSE NS0-191 Exam Questions NetApp NS0-191 Practice Exam

An Article by Delia Green in Computers and Technology

2 days ago

NS0-191 exam is a new turning point in the IT industry. Killtest is a site that comprehensively understands the Network Appliance NS0-191 exam. Killtest is recognized as the leader of a professional certification exam, it provides the most comprehensive Network Appliance certification standard NS0-191 Dumps NCSE NS0-191 Exam Questions NetApp NS0-191 Practice Exam...

Why Quality Content is Important For Your SEO

An Article by Kate Cage in Internet

2 days ago

Search engine optimization is an important part of your business content marketing strategy. It influences your position in online search results, allows you to generate more traffic, and consequently helps you generate more leads. In other words, SEO helps your business grow. But there is a catch, you need to create quality content in order to implement SEO in the best way possible...

Healthy Employee, Productive Employee

An Article by Arati Shah in Wellness, Fitness and Diet

2 days ago

The growth of an organisation is determined by the productivity of their employees. The productivity is achieved when the employee is focused, healthy and has a positive competitive work environment. A healthy human state leads to low absenteeism and better work quality and output. Employee productivity has a direct tie to company wellbeing and the bottom line...

Lesser Known Facts About Kanwar Yatra

An Article by Devendar Agarwal in Religion

2 days ago

Facts about Kanwar YatraSawan is here. Sawan is synonymous with Lord Shiva and his worshippers, also known as Kanwariyas, they travel to places like Haridwar, Allahabad, Gaumukh, and Gangotri in Uttarakhan and Sultanganj in Bihar to get Gangajal, i. e. the holy water from the river Ganaga, to offer to Lord Shiva...

Modern Home Architecture & Decor Trends of 2017

An Article by Bimal Hegde in Real Estate

2 days ago

If you plan to buy a property in Bangalore, you surely want to keep yourself updated about the latest trends in architecture and home decor. There are plenty of 2/3bhk flats in Bangalore available for sale, but you would want to buy one that is trendy, contemporary and well designed. So, what are the residential architecture and decor trends for the year 2017...

Developing Mobile Apps 70-357 Braindump

An Article by Kruis Barry in Education

2 days ago

You can choose Passcert Developing Mobile Apps 70-357 braindump for your 70-357 Certification Exam. Passcert Developing Mobile Apps 70-357 braindump are prepared by IT Professionals. We are strongly confident that you will pass your 70-357 exam the first time. With our complete Developing Mobile Apps 70-357 braindump, you will minimize your Microsoft cost and be ready to pass your 70-357 exam on Your First Try...

H12-321 HCNP-WLAN-CEWA Exam Practice Test

An Article by Kruis Barry in Education

2 days ago

If you feel that you purchase Passcert H12-321 HCNP-WLAN-CEWA exam practice test, and use it to prepare for the exam is an adventure, then the whole of life is an adventure. Gone the furthest person is who are willing to do it and willing to take risks. Not to mention that Passcert H12-321 HCNP-WLAN-CEWA exam practice test are many candidates proved in practice...

Why Marketing Your Book is Important

An Article by Author John Fleming in Marketing

2 days ago

There are between 600,000 and 1,000,000 books published every year in the US alone. On average, they sell less than 250 copies each. With these given data on book publishing, what will you do to make you and your book stand-out. The answer is marketing. With the fast-paced book competition around the world, you need to engage yourself in the hands of the powerful marketing...

Ski and Snowboard Carriers Perfect Solution For Transporting Your Snow Gear

An Article by Tony Bulic in Travel

3 days ago

With projections and unique shapes, one cannot deny that skis, snow boards and allied snow gear just don’t pack up well. Some are undeniably long, some gear is squat and wide or bulky. Trying to fit them all into the meagre storage space of any car is going to be a challenge – they simply occupy too much space...

MLA Style Citation:
CLU, Cavanaugh, D. Robert "Home Sales: Do You Really Know The Tax Exclusion Rules?." Home Sales: Do You Really Know The Tax Exclusion Rules?. 23 Mar. 2007 Isnare.com. 23 Jul. 2017 <https://www.isnare.com/?aid=135900&ca=Real+Estate>.
APA Style Citation:
CLU, Cavanaugh, D. Robert (2007, March 23). Home Sales: Do You Really Know The Tax Exclusion Rules?. Retrieved July 23, 2017, from https://www.isnare.com/?aid=135900&ca=Real+Estate
Chicago Style Citation:
CLU, Cavanaugh, D. Robert "Home Sales: Do You Really Know The Tax Exclusion Rules?." Home Sales: Do You Really Know The Tax Exclusion Rules? Isnare.com. https://www.isnare.com/?aid=135900&ca=Real+Estate
Copy and paste the code below to embed this article:
<a class="embedly-card" href="https://www.isnare.com/?aid=135900&ca=Real+Estate">Home Sales: Do You Really Know The Tax Exclusion Rules?</a> <script>!function(a){var b="embedly-platform",c="script";if(!a.getElementById(b)){ var d=a.createElement(c);d.id=b,d.src=("https:"===document.location.protocol?"https":"http")+"://cdn.embedly.com/widgets/platform.js"; var e=document.getElementsByTagName(c)[0];e.parentNode.insertBefore(d,e)}}(document);</script>