Do you know about this tax implication for homesellers?

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05/15/2015 | Author: Editorial Staff

My client bought his home a few years ago, but now he wants to sell it and take advantage of the tax exclusion of up to $250,000 on the proceeds. What criteria does he have to meet to qualify for the tax exclusion?

The IRS allows a seller to exclude from his taxable income a gain of up to $250,000 on the sale of his home (or $500,000 if he is married filing jointly) if he:

  • Owned the home and used it as his principal residence during at least two of the last five years before the sale;
  • Didn’t acquire the home through a 1031 exchange during the past five years; and
  • Didn’t exclude a gain on another home sold during the two years before the current sale.

Click here to read more information about this tax benefit on

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Categories: Legal, Sellers
Tags: taxes, legal, legal faq, sellers, homesellers


Jennifer Ramsey on 06/05/2015

To clarify, I meant to bring the Danger Report up for general conversation only, not to imply that anyone in this conversation is a Marginal Agent. I feel very blessed to work for an association that promotes and supports Realtors:

Our Mission Statement:
“To be the advocate for REALTORS® professionalism, profitability and success while defending the private property rights of the communities we serve.”

Cynthia Lott on 06/05/2015

Jennifer, I agree.  Knowledge is power.  That is why I have spent so many years learning and teaching my trade.  Surely, you were not implying I was a marginal agent.  I do know the tax information as I have to teach it; however, I am very careful to not hold myself out as being an expert in an area in which I am not.  Many agents get themselves in trouble for doing this very thing.

You have a wonderful association in Tyler.  It is a beautiful facility and I think very highly of Gloria and Cam.  In fact, I used to live in Tyler and it holds a very special place in my heart as that is where I met my husband.

Jennifer Ramsey on 06/05/2015

If you read the Danger Report, here is wht you will find:
“Masses of marginal agents” are threatening the industry—that is, unskilled salespeople who lack the experience to coach buyers and sellers.
“The real estate industry is saddled with a large number of part-time, untrained, unethical and/or incompetent agents,” according to NAR’s report. “This knowledge gap threatens the credibility of the industry.” The NAR report acknowledges that only modest education is needed to earn a real estate license. “Becoming a cosmetologist requires an average of a 372 hours,” the report says. “But to become a licensed real estate agent requires an average of only 70 hours, with the lowest state requirement being 13 hours.”
Every Realtor needs as much education on every topic available for their clients. Here in Tyler, Texas… our association…..we educate with MCE, GRI and also provide many seminars (free to our members) on tax prep, 1031 Tax exchange, water rights, mineral rights….we do everything possible to support our Realtors.

Rosanne Moore on 05/30/2015

I agree with Ken.  This is basic tax knowledge.  I think the explanation provided in the Q and A would be fine for a realtor to communicate to a seller. However, if they want to go into specifics, then you should refer them to a CPA.

Cynthia Lott on 05/21/2015

Ken, I certainly respect however you choose to do your business.  I have many more credentials than opening up a lockbox, although that is something that is necessary and part of my job.  I am a real estate broker, approved by TREC to teach qualifying and CE classes and do so on a regular basis, am approved by the Texas REALTOR’s University to teach most GRI classes, and I have a master of science degree in Human Relations and Business.  I am not qualified in any form or fashion to give advice outside my field of expertise.  However, I do have a list of very competent professionals in the event my clients need expertise that I cannot provide.  There is a difference between being knowledgeable and providing advice.

Ken Smith on 05/21/2015

I don’t think you need to be a CPA to help clients with the most basic tax knowledge. To provide value, agents need to know the basics in many fields. Referring every little question to another specialist is exactly the kind of behavior that makes so many people think that all a Realtor is good for is opening the lockbox. As professionals, we need to step up our game or else we will be replaced.

Mark McNitt on 05/15/2015

This is not a “hot” topic in the respect that most sellers do not see those type of equity increases when selling their homes.  However, those that work in the luxury market might see these types of price gains and be more familiar with these IRS rules.
We do get calls from clients worried about paying taxes on ANY price increase as they get false information from friends or read they have to pay a tax if their home sales price is above “$250,000”.  Always good to be knowledgeable on this and other tax topics as it effects our clients bottom line.

Cynthia I. Lott, GRI, ABR, CHMS, green, BPOR on 05/15/2015

I never give tax advice of any kind.  The advice I would give would be to consult a CPA.

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on Any legal or other information found here, on, or at other sites to which we link, should be verified before it is relied upon.

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