The tax benefits of selling your home can be quite great. The most notable tax break to selling your home is that you can exclude from taxes up to $250,000 in profit from the sale of your home if you’re a single owner, $500,000 for couples filing jointly, and not owe any capital gains taxes. This exclusion also covers the sale of a parcel of land adjacent to your house, unless it’s used for business.
First, the property you’re selling must be your principal residence, which simply means that you live in it.
Second, you must have lived there for at least two of the previous five years, although this time does not need to be sequential. You are allowed to aggregate your time living in the house to meet the two-year residency requirement. What does this mean? It means that you can rent your house for two years, live in it for two, and rent it for another year and still be eligible since during those five years you owned and lived in the property for two years.
Finally, while technically there’s no limit on the number of homes you can sell and reap tax-free gain, each sale must be at least two years apart. That still leaves you room to make some money on several properties. You can sell your residence this year, pocket any gain within the tax limits and buy a new residence. Two years later, you can do the same thing, again and again every two years.
Please see your tax attorney for more information on tax benefits that are unique to your specific selling situation.
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