Avoiding Surprises: The Tax Impact of Selling Your Home and How to Prepare

ARTICLE | August 30, 2024

Authored by Vasquez + Company

With rising residential real estate prices, selling your principal residence could lead to a significant unrealized gain. The article "Beware of the Potential Tax Bill When Selling Your Home" delves into how to leverage the federal income tax gain exclusion for principal residence sales, outlining the ownership and use tests, special considerations for married couples and surviving spouses, and the impact of the anti-recycling rule. It also covers the option to elect out of the gain exclusion and explains the prorated gain exclusion and taxes on gains exceeding the excluded amount.

Key Points

• Ownership and Use Tests: Requirements to qualify for the home-sale gain exclusion.
• Special Considerations: Rules for married couples, unmarried surviving spouses, and the anti-recycling rule.
• Electing Out: When it might be beneficial to forego the exclusion.
• Prorated Exclusion: Conditions and calculations for a reduced gain exclusion.
• Tax Rates: Long-term capital gain rates and additional taxes that may apply.

For more information, read the full article here.

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