You May Be Able To Shelter Up to $500,000 In Your Home!

Those who own homes are beginning to realize that having such an asset does more than simply give them a place to live. For people who make money from the sale or trade of their permanent home, there are significant tax breaks available that can make the process much more financially rewarding. In fact, up to $250,000 can be excluded from your tax return in some situations for a single person and some married couples can exclude up to $500,000. This makes it possible for these individuals to make money off of their homes without having to pay a significant amount in taxes. This can only be done every 2 years, however, so be careful when filing your return. Also, remember that you cannot deduct money from your tax return for losses on a home.

There is a set of criteria that must be passed in order to be eligible for this exclusion, beginning with owning the home and living in it as a main residence for two of the past five years. This means that you cannot have rented the home out or only used it as a seasonal residence over that time, but rather must have permanently lived at that address. This must be met in order for you to qualify, so be sure that you follow all of the rules before filing your taxes.
If you do not meet the afore mentioned criteria, there is still another way that you can receive an exclusion. This will happen if you were forced to sell the home because of unforeseen circumstances like losing your jobs, illness, or anything else that made it difficult for you to afford your house. If you are selling your home merely for the profit, you must meet the other criteria, but if you were forced into it, then you may still be eligible for a tax break.

Speak to an experienced real estate agent before filing for any of these tax benefits because they will probably have more information on whether or not you qualify. If you are still unsure, ask your accountant for Ownership and Use Tests.

In order to receive any of these exclusions, you must use an ownership test, in order to decide if meet the ownership requirements. What these test say is that you must have owned the home for two of the last five years and lived in the home for two of the last five years.

If you own more than one house, then it must be decided which house is your main house because you can only receive a tax break on the sale of your main home. For example, if you own one house in the city and a beach house where you spend the summers, the city house would be your main residence because that is where you spend most of your time. In addition, if you own one house, but live a house that you are renting from someone, the rented house is your actual home, so the house that you own would not be eligible for a tax break.
If this criterion is met, you will be able to receive a tax break when you sell your home on up to $250,000 per person. This is a significant saving that can making selling your home every few years worth it.