Top 10 Tax Tips If You Sold Your Home in 2023Published:
Have you heard of this? You might not have to pay taxes on the gain if you sell your home and make a profit. Yes, this is true, and it is a huge savings. If you are single, you can claim up to 250,000 in tax-free gains, and if you are married, you can claim 500,000. It’s just one of many tax facts to keep in mind when you’re selling your house.
Here are 10 important tax tips you should know if you sell your home:
Tax Tip #1:
If you have a capital gain from the sale of your home, you may be eligible to exclude your gain from tax. Start and check to see if you meet the IRS ownership and residence requirements.
The ownership requirement is met if you owned the home for at least 24 months (2 years) out of the last 5 years before it was sold (closed). When filing jointly, only one spouse must meet the ownership requirements.
The Residence requirement states that within the previous five years, you must have owned the home and lived there for at least 24 months. Ensure that you meet the residency requirement. A 24-month residency can fall anywhere within a 5-year period, and it does not have to be consecutive. It doesn’t have to be one block of time. During the 5-year period, a total of 24 months (730 days) of residence is required. In contrast to ownership requirements,
To qualify for the full exclusion, each spouse must meet the residence requirement individually.
Tax Tip #2:
There are some exceptions when it comes to the rules governing the ownership and use
of your home. Certain exceptions apply to persons with disabilities, as well as military personnel and some government and Peace Corps workers. See IRS Publication 523, Selling Your Home, for details.
Tax Tip #3:
You can exclude up to a $250,000 gain from the sale of your home (or up to $500,000 if you’re married filing jointly). Note that the Net Investment Income Tax will not apply to your excluded gain.
Tax Tip #4:
If the gain from selling your home is not taxable, you may not be required to report it on your Federal tax return. (See Tax Tip #5 for more information.)
Tax Tip #5:
If you cannot exclude all or part of the gain, you must report the home sale to the IRS on your tax return. Even if you choose not to claim the exclusion, you are required to report the sale on your tax return. This is also true if you get IRS Form 1099-S, Proceeds From Real Estate Transactions. If you report the home sale to the IRS, it’s a good idea to read through the Q&A on the Net Investment Income Tax.
Tax Tip #6:
In general, you are only allowed to exclude the gain from the sale of your main home once every 2 years.
Tax Tip #7:
If you own more than one home, you can only exclude the gain from the sale of your primary residence. As the name implies, your “primary residence” is where you spend the majority of your time.
Tax Tip #8:
If you claimed the First-Time Homebuyer Tax Credit when you bought the home, there are special rules that apply to the sale. See IRS Publication 523 for details about those rules.
Tax Tip #9:
If you sell your main home at a loss, you cannot deduct it on your Federal tax return.
Tax Tip #10:
After you sell your home and move elsewhere, make sure to update your address with the IRS. You can do this by filing IRS Form 8822, Change of Address.
If you haven’t filed your taxes, use E-file to prepare and file your Federal tax return. The tax software will do most of the hard work for you. If you choose to file a paper tax return, you can use the Worksheets in IRS Publication 523 to help you.