Debbie Bachmann
Tax implications of selling a home

                    Tax Implications of Selling a Home


Selling a home can have a major impact on your federal and state tax
returns.

Check with your tax consultant on the factors that may affect taxes resulting
from the sale of your home. For example:

*  Whether you purchased the home or acquired it by gift or inheritance
*  Whether you used your home partly for business or rental
*  Costs associated with selling your home
*  Home improvements or additions, which may help to offset capital gains
*  Gain from the sale of a prior home on which tax was postponed prior to
the enactment of the federal Taxpayer Relief Act of 1997

The federal Taxpayer Relief Act of 1997 says when you sell your home you
can keep, tax free, capital gains of up to $500,000 if you are married filing
jointly or $250,000 for single taxpayers, or married taxpayers who file
separately. To qualify for the exclusion, you must have used the home as
your principle residence for at least two of the prior five years. It is not a one
time tax exclusion. You can use the exclusion as often as you meet the
qualifications.

The federal Internal Revenue Service Restructuring and Reform Act of 1998
further clarified the law and says you can prorate the $500,000/$250,000
exclusion (not your specific gain) if unforeseen events, such as a job
change, illness, or some other hardship forced you to sell before you meet
the two-year residency requirement.

Many, but not all federal tax benefits are also available from state tax
departments. Be sure to discuss your move with a tax professional familiar
with state tax rules, especially if you are moving from one state to another.
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