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House Tax Tips

The real estate prices have been rising. Interest rates are still very low. 

Perhaps now may be a great time to sell your main home… 

If you sell your primary home, you may be in luck. The IRS allows you to exclude $500K of capital gains if you sell your main home you own and you have lived there 2 of the last 5 years. (Married filing joint). 

The 2 years means 730 days. It does not have to be consecutive days. 

If you are single or married filing separate, you get a $250K exclusion. 

There are some exceptions if you had to move due to unforeseen circumstances and you may be eligible for a partial exclusion. Call us to discuss if this applies to you.  

Very different rules apply on 2nd homes, flips, and rentals. 

Installment Sale on Main home 

Sometimes you may have difficulty selling a home to a person with poor credit and you “become the bank,” and you let them make monthly payments directly to yourself. This is one strategy to spread out the gain on the sale over many years—possibly 30 years even! 

You collect principal and interest. You report all the interest each year, and you report only a portion of the principal. A part of it is a “return of principal,” and is non-taxable. Rentals, 2nd homes, and some very expensive homes are often sold this way. And hopefully you will receive some of the money in your later years when you are in a lower tax bracket.