Many seniors worry about the tax consequences of selling their home and moving to a condo, adult living community or even into a mother-in-law suite in the home of one of their children. There are a few rules that can help you.
Every 2 years, the law allows you to sell a home for up to $250,000 and take a tax exclusion. This applies to anyone, whether they're living on social security and retirement savings or still working for a salary. To be eligible, the home you sell must have been your primary residence for 2 out of the last 5 years. The tax exclusion is $250,000 for a single person; $500,000 for a married couple.
Also, people who are over 55 years of age are allowed to take a one-time exclusion of $125,000 on the sale of a primary residence. The two exclusions can be combined once. So, a married couple could sell a home for $625,000 without incurring tax consequences.
What if your home will sell for $800,000? There's another rule that can help with that. If you kept your primary residence and rented it out, the excess money can then be rolled into another real estate property rental after the sale. In our scenario, that's a difference of $175,000. So, the $625,000 is tax free and the $175,000 can be used to buy a house, duplex, or multi-family building which would then be rented out for monthly income. If the sale of your home-turned-investment property nets more money, that amount can be rolled over into that amount of income producing real estate.
*Please check with your accountant, tax advisor, and real estate agent before making a move. Be sure that everyone is clear on where the money is going and how it will be declared on your tax return.
If you are considering selling your home, call 816-560-3758 for a private consultation to analyze value and condition in our current market.
Kansas City Real Estate Year End 2011 Market Reports: Sunset Hill, Brookside, Waldo - Protecting Property Rights.
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