Currently, in 2017 you are exempt from Capital Gains Tax when you sell your Primary Residence in which you have lived at least 2 Years.
A Married Couple is exempt up to $500,000.00, and a Single person is exempt for $250,000.00. The Home must be considered a "Primary Residence" based upon the IRS in which the rule states you must have occupied it for at least 2 Years out of the last 5 Years.
Currently, I have planned my life around this rule and consider to sell my home, replacing it with a newer one here on Maui. Unfortunately, the house we are buying is not yet completed and will be ready for occupancy in 2018.
Because of this, we are waiting for that day to Sell our current residence, and we are going to use some of our Gains to pay for the Newer Place so financing will not be a hardship in the future.
Not yet confirmed of what Tax Laws affect us by, but both the Senate and House may change that requirement going from a 2 out of 5 Year to a 5 out of 8 Years. In other words, if you are thinking about selling your house in the next couple of years but you have only lived there for a short time you could owe taxes on any gain from the sale.
We know, the tax code currently allows for hardship exceptions to that two-year rule, and it is not clear to the point whether a similar exemption would be available under the revised five-year requirement.
We also have to remember that you can offset the gains by expenses. So keep your Expenses Receipts during the time you Purchased your home upon Tax Season.
Personally, I think, this law will slow down people from selling homes which could slow down the Market, providing less inventory and may raise the prices of homes. I also think that once people on the fence reached their five years, we will see more Houses and Condos on the market and lead to a price competition.
So in the next 2-4 Weeks, we will know if the IRS will modify the current rules or thow it out entirely bill.
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