They say that two things are constants in life: death and taxes. Many people are questioning which one is worse these days. Taxes are a daily part of life, so it’s important that we pay attention to our rights as citizens and make sure that we don’t pay more than our fair share.
Being an expert in real estate sales, I am always asked about tax liabilities for homeowners. My intent is for this article to clear up any confusion in that area.
The good news is that in most cases, your home is exempt from paying any capital gains taxes. Capital gains tax is applied when you sell an asset (stocks, real estate) for more than what you paid for the item. So when it comes to your primary residence, there are some exemptions from paying this tax.
- You must have occupied the home as your primary residence for 2 years out of the last 5 years.
- You have not excluded any capital gains taxes from other home sales in the last two years
If you are single, you can exclude up to $250,000 from capital gains. And if you are married, $500,000 when filing jointly. This represents a huge break in taxes and is definitely becoming more and more important in this market where homeowners are gaining back equity in their homes.
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