Tax Tips for Selling Your Home By Carol P Zeitz

Selling a home can be a complicated process but if sell at a gain, it can feel great! However, there are IRS laws related to the sale of your home, especially if you have a gain. You need to know these rules as you go through the process, so that you have no surprises later. You might be eligible to exclude all or part of that gain from your income, but there are restrictions. Here are some tips from the IRS. Keep these things in mind when you begin the process of selling your home.

1. If you have owned and used your home as your primary residence for two out of the past five years prior to the sale, you are eligible to exclude the gain from your taxable income. If you have more than one home, your primary residence is the one you live in most of the time. You will have to pay tax on any gains from selling a second or vacation home.

2. You might be able to exclude up to $250,000 of the gain, or $500,000 if you file jointly with a spouse. Worksheets are included in IRS Publication 523, Selling Your Home, to help you figure out the gain and how much you can exclude from income.

3. If you already excluded the gain from another home during the preceding two years, you can't do it again.

4. If you are eligible to exclude all of the gain, you don't have to report it on your tax return.

5. If your gain cannot be excluded, report it on Schedule D, Capital Gains and Losses, with your Form 1040.

6. Unfortunately, you cannot deduct a loss!

7. When you move, don't forget to update your address with the U.S Postal Service and the IRS to ensure you receive refunds or correspondence. You can use Form 8822, Change of Address, with the IRS.

8. And an extra note: if you received the first-time homebuyer credit and within 36 months, you no longer use the home as your primary residence, you are required to repay the credit. You will need to use Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, with that year's return. The full amount of the credit will show up as additional tax on your return.

For more information about selling your home, see IRS Publication 523, Selling Your Home.

Carol Zeitz is a Real Estate Broker in Houston, TX. She owns and manages an independent brokerage in Fort Bend County and helps buyers and sellers with real estate transactions throughout the Houston metro area. If you are interested in Houston real estate, you can get a free Market Snapshot Report for your own home, or for a neighborhood of interest, anywhere in the Houston metro area.