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Salvage big tax break for an unexpected home sale

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in Small Business Tax,Small Business Tax Deduction Strategies

Due to extenuating circumstances, you may not qualify for the giant home-sale gain exclusion when you sell your principal residence. But if you can’t get the whole loaf of bread, at least grab a slice of it.

Strategy: Claim the partial home-sale gain exclusion whenever possible. In some cases, the tax law permits you to reduce the amount of the taxable gain on the sale, even if you don’t meet the full term the law requires.

The IRS just issued two new rulings that provide a window into the tax rules for partial exclusions.

Here’s the whole story: If 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 the first $250,000 of home-sale gain ($500,000 for joint filers). The exclusion isn’t available if you’ve claimed one within the past two years.

But if you sell your home without meeting the two-year requirement—or you elected t...(register to read more)

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