My client bought his home a few years ago. 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
- didn’t exclude a gain on another home sold during the two years before the current sale.
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5 Comments on "How your client can exclude from taxable income some of the gain on the sale of his home"
I am real careful with matters of this kind. I may say something along the lines of “I believe the tax regulations allow… but, I before we proceed on that basis, please confirm with your tax accountant or CPA – let’s not get this wrong.”
Much like REALTORS should not practice law, neither should they practice as a tax expert. Something failed to consider could cause a huge problem. And, even if a REALTOR does know the answer, a second opinion will not hurt!
Sadly this won’t be very much help for my 96 year old unmarried client that is selling the home that she has lived in since she was 6 years old, inherited in 1969 and it has been free and clear for decades. The property is now worth well over $500k and the proceeds are for her assisted living care. She is going to have to pay a big chunk to Uncle Sam. If her heirs were inheriting it they wouldn’t have to pay any taxes on it. Doesn’t seem fair.
Deleted. Not relevent
Does this tax exemption apply to foreign people who own a home in the states and then sale it?
So no vestiges of the ‘one time’ exist nor the ‘basis’ that’s capable of being increased by the additions of capital improvement documentation?