There are many things that go through a homeowners mind when they are in the process of selling their home. One of the main concerns deals with the capital gains tax. Often times the IRS will tax a certain portion of the gains you get from selling your house, but here are some tips that you can use to minimize your tax liability when selling a home.
– If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 ($500,000 if joint return) of the gain from your income.
– You are eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
– You are not eligible for the full exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
– Gains that aren’t excluded are taxable and must be reported on Form 1040, Schedule D, Capital Gains and Losses.
– If you can exclude all of the gain, you do not need to report the sale of your home on your tax return.