10 Tax Facts About Selling Your Home

Do you know that if you sell your home and make a profit, the gain may not be taxable? That’s just one key tax rule that you should know. Here are ten facts from the IRS to keep in mind if you sell your home this year.

1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.

2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details see Publication 523, Selling Your Home.

3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review Questions and Answers on the Net Investment Income Tax.

6. Generally, you can exclude the gain from the sale of your main home only once every two years.

7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.

9. If you sell your main home at a loss, you can’t deduct it.

10. After you sell your home and move you should send the IRS a completed Form 8822, Change of Address, to do this.

Call Green Financial Services if you have questions about these tax facts.

Raising Your Grandkids? Look for tax breaks.

If you happen to be a couple or an individual who is raising your grandchild or grandchildren, you may qualify for certain tax breaks.

  • Single Grandparents: If you’re single and caring for a grandchild, you may be able to file your tax return as head of household, which offers lower tax rates than single status. Your grandchild must live with you for over half the year, be under age 19 at year-end (under 24 if a student), and have provided less than one-half of her own support for the year.
  • Grandkids as Dependents:  You may also be able to claim your grandchild as a dependent, if you’re the one providing more than one-half of her support. This will entitle you to an additional exemption ($3,950 for 2014) and will also enable you to include her medical and dental expenses when computing your allowable medical deductions.
  • Working Grandparents with Childcare: If you’re working but must pay for your grandchild’s care to do so, you may qualify for a credit equal to a percentage of the expenses. Your grandchild must live with you more than half the year and be a dependent, either under age 13 or otherwise unable to care for himself.
  • Working Grandparents with Earned Income Credit: Working grandparents may also be able to claim the earned income credit (EIC). Their grandchild must qualify as a dependent, except he may provide more than half of his own support. More affluent grandparents won’t be eligible for this credit, since income restrictions apply.
  • Grandparents Paying for Education: Additional tax breaks may be available to grandparents who pay to educate their dependent or otherwise qualifying grandchildren.

Child tax credits are available to most grandparents with dependent grandchildren under age 17. Although income limitations apply, they are less restrictive than those for the EIC. Contact Green Financial Services for more information.