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Cash in on home sale bonanza

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in Small Business Tax

Would you pass up a chance to pocket a half million dollars in tax-free profits? Not likely.

Strategy: Keep records to protect the generous home sale exclusion. When you sell the place, most or all of the home’s appreciation in value may be exempt from the federal capital gains tax, if you qualify.

Here’s the whole story: As long as you’ve owned and used your home as your principal residence for at least two of the previous five years, you can elect to exclude from federal income tax up to $250,000 of home sale profit if you’re a single filer or $500,000 for joint filers. There are no limits on the number of times you can claim the exclusion.

The potentially taxable gain amount (before the exclusion) is the difference between the net selling price and your adjusted basis in the home. For example, your basis may have been reduced to reflect rollovers of gains from prior home sales under the old law, tax-free gain rollover rul...(register to read more)

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