Tax Tip of the Week
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For the week of
August 28, 2000
Tax benefits apply to "special circumstance" home sales
By now, most people know that, if you qualify, you can exclude
up to $250,000 ($500,000 for married couples) of gain on the sale of your principal residence.
But there are also some benefits for sales under special circumstances that you should know about.
If you need to move before you meet the two-year occupancy test, you may still get a partial exclusion. If you
move due to a change in employment, or for health reasons, or for some unforeseen circumstances, you may still
get some of your gain excluded from taxation. If you live in your home for only one year, and otherwise qualify,
you would get one-half of the exclusion.
Renting out your home before you sell will not automatically disqualify you from taking the exclusion if you otherwise
qualify for it. Certain depreciation you deduct during the rental period will cause you to have some taxable gain
when you sell.
If your residence was used partly for business, such as rental property or for a home office, you will have two
parts to your sale. One part will qualify as your residence and the gain can be excluded. The other part is treated
as the sale of business property and is subject to tax.
Homeowners who have been moved to a licensed care facility due to physical or mental health problems might still
quality for the exclusion when their home is sold.
The tax law has not changed on the issue of selling your home at a loss. The loss on the sale of a personal residence
does not give you a tax deduction or a tax loss.
If we can be of assistance with your tax planning or other financial matters, please contact us. We are here to
help you.
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