Homeowners may qualify to exclude from their income all or part of any gain
from the sale of their main home.
Below are tips to keep in mind when selling a home:
Ownership and Use.
To claim the exclusion, the homeowner must meet the ownership and use tests.
This means that during the five-year period ending on the date of the sale, the
homeowner must have:
- Owned the home for at
least two years
- Lived in the home as their
main home for at least two years Gain. If there is a
gain from the sale of their main home, the homeowner may be able to
exclude up to $250,000 of the gain from income or $500,000 on a joint
return in most cases. Homeowners who can exclude all of the gain do not
need to report the sale on their tax return
Loss.
A main home that sells for lower than purchased is not deductible.
Reporting a Sale.
Reporting the sale of a home on a tax return is required if all or part of the
gain is not excludable. A sale must also be reported on a tax return if the
taxpayer chooses not to claim the exclusion or receives a Form
1099-S, Proceeds from Real Estate Transactions.
Possible Exceptions.
There are exceptions to the rules above for persons with a disability, certain
members of the military, intelligence community and Peace Corps workers, among
others.
Worksheets.
Worksheets are included in Publication 523, Selling Your Home, to help you
figure the:
- Adjusted basis of the
home sold
- Gain (or loss) on the
sale
- Gain that can be
excluded
Items to Keep In
Mind:
- Taxpayers who own more
than one home can only exclude the gain on the sale of their main home.
Taxes must paid on the gain from selling any other home.
- Taxpayers who used the first-time
homebuyer credit to purchase their home have special rules that apply
to the sale. Use the First Time Homebuyer Credit Account
Look-up to get account information such as the total amount of your
credit or your repayment amount.
- Work-related moving
expenses might be deductible;
- Taxpayers moving after
the sale of their home should update their address with the IRS and the
U.S. Postal Service by filing Form
8822, Change of Address.
- Taxpayers who purchased
health coverage through the Health
Insurance Marketplace should notify the Marketplace when moving out of
the area covered by the current Marketplace plan.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
Certain energy-efficient home improvements can cut your energy bills and
save you money at tax time. Here are some key facts that you should know about
home energy tax credits:
Non-Business Energy Property Credit
- Part of this credit is worth 10 percent of the cost of
certain qualified energy-saving items you added to your main home last
year. This may include items such as insulation, windows, doors and roofs.
- The other part of the credit is not a percentage of the
cost. This part of the credit is for the actual cost of certain property.
This may include items such as water heaters and heating and air
conditioning systems. The credit amount for each type of property has a
different dollar limit.
- This credit has a maximum lifetime limit of $500. You
may only use $200 of this limit for windows.
- Your main home must be located in the U.S. to qualify
for the credit.
- Be sure you have the written certification from the
manufacturer that their product qualifies for this tax credit. They
usually post it on their website or include it with the product’s
packaging. You can rely on it to claim the credit, but do not attach it to
your return. Keep it with your tax records.
- You must place qualifying improvements in service in
your principal residence by Dec. 31, 2016.
Residential Energy Efficient Property Credit
- This tax credit is 30 percent of the cost of
alternative energy equipment installed on or in your home.
- Qualified equipment includes solar hot water heaters,
solar electric equipment, wind turbines and fuel cell property.
- Qualified wind turbine and fuel cell property must be
placed into service by Dec. 31, 2016. Hot water heaters and solar electric
equipment must be placed in to service by Dec. 31, 2021.
- The tax credit for qualified fuel cell property is
limited to $500 for each one-half kilowatt of capacity. The amount for
other qualified expenditures does not have a limit. If your credit is more
than the tax you owe, you can carry forward the unused portion of this
credit to next year’s tax return. • The home must be in the U.S. It
does not have to be your main home, unless the alternative energy
equipment is qualified fuel cell property.
Use Form
5695, Residential Energy Credits, to claim these credits.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
Renting out a vacation property to others can be profitable. If you do this,
you must normally report the rental income on your tax return. You may
not have to report the rent, however, if the rental period is short and you
also use the property as your home. Here are some tips that you should know:
- Vacation Home. A vacation home
can be a house, apartment, condominium, mobile home, boat or similar
property.
- Schedule E. You usually
report rental income and rental expenses on Schedule
E, Supplemental Income and Loss. Your rental income may also be
subject to Net
Investment Income Tax.
- Used as a Home. If the property is
“used as a home,” your rental expense deduction is limited. This means
your deduction for rental expenses can’t be more than the rent you
received.
- Divide Expenses. If you personally
use your property and also rent it to others, special rules apply. You
must divide your expenses between rental use and personal use. To figure
how to divide your costs, you must compare the number of days for each
type of use with the total days of use.
- Personal Use. Personal use may
include use by your family. It may also include use by any other property
owners or their family. Use by anyone who pays less than a fair rental
price is also considered personal use.
- Schedule A. Report deductible
expenses for personal use on Schedule
A, Itemized Deductions. These may include costs such as mortgage
interest, property taxes and casualty losses.
- Rented Less than 15
Days.
If the property is “used as a home” and you rent it out fewer than 15 days
per year, you do not have to report the rental income. In this case you
deduct your qualified expenses on Schedule A.
Source: Internal Revenue Service
contact@officetaxservices.com
(858)247-1680
