When preparing to sell a home, there are many things that a homeowner should take into account. Below are just a few things to take into consideration that may impact your tax return at filing time.
Not All Home Sales Must Be Reported
When selling your home, you may be able to sign documents that state you will not have any taxable gain from the sale of your home. Once this document has been signed, the closing agent will not send Form 1099-S (Proceeds From Real Estate Transactions) to the IRS. If you do not receive Form 1099-S, you do not need to report the sale to the IRS. However, if you do receive this form, you must report it.
You May Have to Pay Back Your First-Time Home Buyer Credit
Did you purchase your home in 2008 and have the First-Time home buyer credit applied? If so, you may have to pay back a portion, or all of this credit when you sell your home. This may also be true if you purchased a home in either 2009 or 2010 and sold it, or rented before the 36 months was up. If this applies to you, you will have to pay back the smaller of one of these amounts:
• Gain from sale of home
• Credit reduced by repayments (only if credit was from 2008)
• The full credit amount you received (applied to credit from 2009 only)
However, there may be a few circumstances where you could qualify for an exception, such as if you receive no gain from the sale of your home. To find out if any exceptions apply to you, speak with our knowledgeable team at Perfect Balance Accounting Services, LLC.
When selling your home, you can typically exclude up to $250,000 of the gain from your home income ($500,000 if filing jointly). This exclusion is also not taxable according to the new tax law, effective in 2013 (Net Investment Income Tax). For other exclusions, it is important to meet with a tax professional.
When selling a home, some homeowners experience a loss. This means the home sells for less than they initially paid for it. These losses are not deductible.
Selling Multiple Homes
When selling multiple homes, it is important to know that one can only exclude the gain from the sale of their primary home. Taxes must be paid on the gain from all other homes.
Update Your Address with the IRS
After the sale of your home, it is important to update your address with the IRS, as well as the US Postal Service (USPS).
Remember, these are just a few tax tips to consider when selling your home. For more tax or accounting tips or advice, please contact one of our expert tax professionals at Perfect Balance. We can answer any questions and help you through this often confusing and trying time. If you are in Racine, Kenosha, Oak Creek, Milwaukee, or any other location in Southeastern Wisconsin, contact us today!