Do You Know About the Taxpayer Relief Act of 1997 When Selling?

By
Real Estate Broker/Owner with Aspen Lane Real Estate Colorful Colorado CRE# 40005863

 

Do You Know About the Taxpayer Relief Act of 1997 When Selling Your Home?

 

taxesI was recently at a listing appointment with an older gentleman whose wife had passed not too long ago.  The home was just too big for him and it was time for him to move on.  He bought the home in the 1980’s and had since paid it off. 

 

As we were chatting, he was concerned about the capital gains he would be faced with when he sold his home.  I told him that he should qualify for the Taxpayer Relief Act of 1997.  Funny – he knew nothing of it. 

 

I explained that the Relief Act allows sellers to sell their property as long as they have lived there for 2 of the last 5 years and take advantage of this tax relief.  For single individuals, they can realize up to $250,000 in capital gains TAX FREE.  For married couples, it is $500,000. 

 

There is no requirement to roll these proceeds over to a replacement home, so a seller can take this money and go on a cruise around the world if they so desire. 

 

Additionally, there is no limit to the number of times you can use this exemption.  You just need to make sure you have lived in the home as your primary residence for two of the past five years.  This exemption does not apply to investment or vacation homes. 

 

So let’s go back to my older seller whom I met with this week.  Does he get to take the $500k tax relief exemption or is he limited to only $250k since his wife passed?  The answer is pretty straightforward.  The unmarried widow or widower has up to two years after the death of their spouse to sell their home and take advantage of the $500k tax exemption.

 

Before listing your home for sale, consult with your CPA or attorney to make sure these exemptions apply to your situation.  This is serious money and requires expert advice!

 

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Rebecca Gaujot, Realtor® 03/09/2014 04:00 AM
  2. Roy Kelley 03/09/2014 09:12 PM
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Rainmaker
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Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
Los Angeles Pasadena Area Real Estate 818.516.4393

Hi Belinda - we see/hear and know things about real estate because it's what we do everyday.  I'm no longer surprised when this question is asked even though I have addressed it in various newsletters, emails, open house hand-outs, conversations and more with many people.   I guess it's not important to them until it hits a bit closer to home and events in their lives.  

All in a day's work, right?

Mar 08, 2014 06:58 AM #1
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Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

Yes Michael.  It is good to have some surprising solutions for people. 

Mar 08, 2014 07:01 AM #2
Rainmaker
2,990,907
Michael Jacobs
Coldwell Banker Residential Brokerage - Pasadena, CA
Los Angeles Pasadena Area Real Estate 818.516.4393

And especially when it can be some very good news too!

Mar 08, 2014 07:03 AM #3
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Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

Yes,  He was a little in shock.  Now he just needs to get his home ready to rock and roll. 

Mar 08, 2014 07:06 AM #4
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Toni Weidman
Sailwinds Realty - Trinity, FL
26 Years Selling Homes in New Port Richey, FL

It is amazing so many folks don't know about this tax change, Belinda. But if they have lived there a long time, why would they?

Mar 08, 2014 08:49 AM #5
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

This is on the table in D.C. for elimination so it is not just tax deductions we are worried about. So many older folks have their wealth in their home and this relief is essential for their end years.

Mar 08, 2014 09:04 AM #6
Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Hope this tax deduction is not eliminated. Home sellers should get tax advice before listing their home for sale.

Mar 08, 2014 09:12 AM #7
Rainmaker
4,849,787
Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

This is valuable information for prospective home sellers and it is surprising to find those that do not know about this benefit. 

Mar 09, 2014 01:55 AM #8
Rainmaker
2,401,017
Rebecca Gaujot, Realtor®
Vision Quest Realty, Martha Hilton, Broker - Lewisburg, WV
Lewisburg WV, the go to agent for all real estate

Thanks for the reminder. I need to tell my sellers who have a contract on their home now and they are in their 70/80s.

Mar 09, 2014 03:47 AM #9
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Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

I sure hope they don't cut this tax relief bill.  That would affect so many elderly folks who need this money to get them through the years of needing assisted living.

Mar 09, 2014 04:16 AM #10
Rainmaker
710,217
Cheryl Johnson
Highland Park, CA

If you were in the real estate biz back in the late 90s, you might remember the market was going through a pretty serious downturn. 

In my opinion, passage of the Tax Payer Relief Act was one thing that helped nudge the market towards recovery ....

Sellers were finally able to sell their homes and keep some money in their pockets ... which helped the economy in general at that point, too!

Mar 10, 2014 12:17 AM #11
Rainer
78,723
Mike Sibbald
Elevations Real Estate, LLC - Fort Collins, CO
Broker/Owner Elevations Real Estate, LLC

Great information Belinda!  I knew about it but it is easy to forget!  Thank you for bringing it to mind again, Mike.

Mar 10, 2014 01:55 AM #12
Rainer
453,195
Diane M. Phillips Realtor 443-286-4365
Frankly Real Estate Inc. - Manchester, MD
Specializing in Carroll Co., MD

Great reminder Belinda! I just worked with someone in just this situation.

Mar 19, 2014 05:51 AM #13
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