The sale of your primary residence can qualify you for a number of advantageous tax breaks. However, the laws are complicated, so you should consult a Lake Mary & Sanford, FL tax preparation expert to help you make the most of these deductions and exemptions and reduce your gain tax. This financial guide outlines the essential rules to help you and your tax advisor minimize the gain tax.
You can keep up to $250,000 (or $500,000 if you’re married and filing jointly) of the profit from the sale of your primary residence from federal income tax. Assuming they meet the IRS’s ownership and usage requirements, the vast majority of taxpayers will be able to take advantage of the exclusion and avoid paying capital gains tax when selling their primary residence (see below).
The loss you incur from the sale is your own. Unfortunately, the loss is not deductible.
You must report the sale of your primary residence on IRS Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D, Capital Gains and Losses. If you have a taxable gain because you do not meet the exclusion threshold, your gain exceeds the exclusion, or you used part of the property for business or rental.
Computing Your Profit or Loss
The selling price, the amount realized, and the revised basis are all crucial pieces of data for calculating a gain or loss.
The selling price is how much money you make from selling your home. You are paying the purchase price when all monies are exchanged along with any notes, mortgages, or other debts that the buyer has taken on, as well as any other property or service you receive. The selling price is then adjusted downward to account for seller-paid costs like commissions, advertising, legal fees, and financing fees.
The disparity represents the “amount realized.” Your gain is the difference between the amount realized and your home’s “adjusted basis,” which will be explored in more detail below. A loss occurs if the amount realized is less than the adjusted basis.
The proceeds from the sale of any personal property you may have had are, however, not included. Furniture, drapes, and lawn tools are all examples of personal property, which are objects that aren’t permanently affixed to a house.