Lifetime Exclusion From Capital Gains Rule For Income Tax And Sale Of Property

Lifetime Exclusion From Capital Gains Rule For Income Tax And Sale Of Property

Lifetime Exclusion From Capital Gains Rule for Income tax and sale of property

Lifetime Exclusion From Capital – https://www.irs.gov/taxtopics/tc701


If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. Publication 523Selling Your Home, provides rules and worksheets. Topic No. 409 covers general capital gain and loss information.

Qualifying for the Exclusion

In general, to qualify for the Section 121 exclusion, you must meet both the ownership test and the use test. You’re eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale. Generally, you’re not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home. Refer to Publication 523 for the complete eligibility requirements, limitations on the exclusion amount, and exceptions to the two-year rule.

Reporting the Sale

If you receive an informational income-reporting document such as Form 1099-S.pdfProceeds From Real Estate Transactions, you must report the sale of the home even if the gain from the sale is excludable. Additionally, you must report the sale of the home if you can’t exclude all of your capital gain from income. Use Form 1040, Schedule D.pdfCapital Gains and Losses, and Form 8949.pdfSales and Other Dispositions of Capital Assets, when required to report the home sale. Refer to Publication 523 for the rules on reporting your sale on your income tax return.

Suspension of the Five-Year Test Period

If you or your spouse are on qualified official extended duty in the Uniformed Services, the Foreign Service or the intelligence community, you may elect to suspend the five-year test period for up to 10 years. An individual is on qualified official extended duty if for more than 90 days or for an indefinite period, the individual is:

  • At a duty station that’s at least 50 miles from your main home, or

  • Residing under government orders in government housing.

 

Refer to Publication 523 for more information about this special rule to suspend the 5-year test.

Installment Sales

If you sold your home under a contract that provides for all or part of the selling price to be paid in a later year, you made an installment sale. If you have an installment sale, report the sale under the installment method unless you elect out. Even if you use the installment method to defer some of the gain, the exclusion of gain under Section 121 remains available. Refer to Publication 537Installment SalesForm 6252.pdfInstallment Sale Income, and Topic No. 705Installment Sales, for more information on installment sales

PLEASE REFER TO YOUR ACCOUNTANT OR TAX EXPERT WHEN DEALING WITH CAPITAL GAINS, THIS IS JUST A GENERAL RULE OF THUMB AND SHOULD NOT BE TAKIN AS TAX ADVICE, I’M JUST A REALTOR, OK

JAY BRU

480-466-4917

https://jaybrugroup.com/lifetime-exclusion-capital-httpswww-irs-govtaxtopicstc701/


Jay Bru Headshot
Author:
Phone: 480-466-4917
Dated: February 17th 2019
Views: 247
About Jay: Jay grew up on a grain and cattle farm in Saskatchewan and started working at a very young age. He g...

Property Search









RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

My Home Group
8360 E. Raintree Dr.
Scottsdale, AZ
602-497-2353
480-736-8410

Other Locations