Real estate info & tips: When Is The Gain Free? The gain is free when the taxpayer can prove the following: • The sales price of the home was $250,000 or under ($500,000 if married and filing a joint return [MFJ]); or • The costs of improvements eliminate any taxable gain (i.e., above $250,000/$500,000 MFJ); and • The original cost of the home sold (generally done by making HUD Form 1 available to the IRS auditor); and • That no more than one home has been reported in the previous two years from the sale date; and • That no prior depreciation has been taken on the home after May 7, 1997. What Tax Planning Requirements Are Obsolete? Common rules under the previous tax provisions are no longer viable, including the following: 1. There is no requirement to reinvest the sales proceeds into another home (i.e., taxpayers do not have to buy equal or up within 24 months). 2. The requirement that the taxpayer must be at least age 55 has been repealed. 3. Fixing-up expenses, including conditions-of-sale repairs, are no longer deductible anywhere. 4. The "moving at least 50 miles" requirement to avoid the once-every-two-years rule has been eliminated. 5. The nontaxable gain does not have to be rolled over into the new home. 6. Renting the home while trying to sell it generally will not cause tax problems.
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