With residential real estate markets surging, significant unrealized gains are piling up for many homeowners. That’s good news if you’re ready to sell, but what about the tax implications? Good question.
Thankfully, the federal income tax gain exclusion break for principal residence sales is still on the books, and it’s a potentially big tax-saving deal for prospective sellers.
But beware of the little-known rule that can reduce your allowable gain exclusion if you have not always used the property as your principal residence.
This article explains that unfavorable rule after first covering some necessary background information. Here goes.
Gain Exclusion Basics
Unmarried homeowners can potentially exclude principal residence gains up to $250,000, and married homeowners can potentially exclude up to $500,000.
You report the taxable part of any gain from selling your principal residence on Schedule D of Form 1040. Assuming no retroactive change to the contrary, the current maximum federal rate for long-term capital ... Log in to view full article.