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Selling a high-priced house? Preserve your tax-free home-sale gains

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in Small Business Tax

The home-sale gain exclusion is probably the largest single federal income tax break for individuals. If you qualify, you can pocket up to a half-million dollars of tax-free profit from the sale of your home—no strings attached.

But that giant home-sale exclusion might not be big enough anymore. Due to skyrocketing real-estate appreciation in recent years, you may still have a king-size tax to pay when you finally sell your castle.

Strategy: Keep meticulous records of your home-related improvement costs. Those expenses increase your tax basis for home-sale purposes (see box below). So, when you finally do sell your home, the higher basis reduces the taxable amount of the gain … possibly to zero.

Without detailed records, you’re just taking a shot in the dark at your actual basis. Make sure you document qualified expenses from year to year.

Here’s the whole story: If you’ve owned and used your home as your principal residence...(register to read more)

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