It’s not often you get a chance to pocket up to a half million dollars without paying a dime of federal income tax. But it could happen when you sell your principal residence.
Strategy: Consider cashing in if you’re sitting on a gold mine. To qualify for this home sale exclusion under Section 121 of the tax code, you must have owned and used the home as your principal residence for at least two years during the five-year period ending on the sale date.
Best of all, the home sale exclusion isn’t a “once-in-a-lifetime” tax break. Theoretically, you can take advantage of this unique tax-saving opportunity several times during your lifetime. The maximum amount of gain you can exclude from tax for each home sale is $250,000 for single filers and $500,000 for joint filers.
But that doesn’t mean the tax road isn’t paved with potential pitfalls.
Prime example: In a new case, a taxpayer who reacquired the principal residence he sold ...(register to read more)