1 : I purchased my first home a little over a year ago, after living in my home for only 15 months I decided to sell since the value of the home increased, in order to buy a larger home. Unfortunately prior to selling I didn't do proper research as far as having to pay taxes on capital gains (my real estate agent assured me I wouldn't have any tax penalties). Are there any exemptions?
2 : Such as using the gain as a down payment on a new home? Or possibly spreading the gain over a few years? What are my options as far as capital gains are concerned and how to possibly reduce the amount I will have to pay when I file?
3 : I understand that I will be able to use the real estate fees/document/sale fees as a deductible but is there anything else?
Answer :
1 : You may qualify to exclude from your income all or part of any gain from the sale of your main home. To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least two years (the ownership test); Lived in the home as your main home for at least two years (the use test). The required 2 years of ownership and use during the 5-year period on the date of the sale do not have to be continuous. The mandatory two-year residence requirement does not have to be continuous, and as long as you lived in your home for a total of two years within the last five years of ownership, you are OK. In other words, if you sell your home in 2013, and you lived in it for all of 2010 and all of 2012, you can take your years together for a total of two years. If you did not sell another principal residence within the last two years, you meet the past sales test.
If you have a gain from the sale of your main home, you may be able to exclude up to $250K of the gain from your income ($500K on a joint return in most cases). If you can exclude all of the gain, you do not need to report the sale on your tax return. If you have gain that cannot be excluded, it is taxable. Report it on from 8949/ Sch D of1040 . There are exceptions to the primary residence exclusion requirements. Now let's say that you still have some capital gains that don't seem to fall under the exclusion. Even if you don't live in your home a total of two years out of the last five, you're still eligible for a partial exclusion of capital gains if you sold because of a change in your employment, or because your doctor recommended the move for your health, of if you're selling it during a divorce or due to other unforeseen circumstances such as a death in the family or multiple births. ("I changed my mind about living here" won't cut it.) In such a case, you'd get a portion of the exclusion, based on the portion of the two-year period you lived there. To calculate it, take the number of months you lived there before the sale and divide it by 24.
2 : As mentioned above. You can use whole or part of the gain as a d/p on a new home; you can’t spread the gao=n over a few years; as long as you are subject to capital gain exemption, you may realize a gain of UP to $250K from the sale of your primary residence without having to pay capital gains tax, as the sale took place after May 6, 1997. If you are married and file a joint tax return, then you may realize a gain of UP to $500K from the sale of your primary residence without incurring a tax obligation. There is no requirement that the profit from the sale of your primary residence be reinvested in another home to qualify for this exclusion. However, s you said, you can do that if you want.
3 : Selling a home can net you some cash. However, the money you earn may be reduced by costs, fees and commissions. In addition, if you make too much money on the sale, the IRS may want his share in the form of capital gains tax. One way to defray the costs of selling a home is to deduct some of the closing costs on your annual income tax return; The first thing to understand is that you can only deduct home closing costs, or settlement fees, if you itemize your deductions on an IRS form on Sch A of 1040. So UNLESS you itemize your deductions on your return on Sch A of 1040, you can’t deduct your real estate related expenses.
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