Showing posts with label how selling your home will affect your taxes. Show all posts
Showing posts with label how selling your home will affect your taxes. Show all posts

Friday, March 25, 2016

How Does Selling Your Home Affect Your Taxes

If you’re in the process of selling your home or are considering doing so, you may have questions about how selling your home will affect your taxes. Unfortunately, there isn’t a simplistic, one-size-fits-all kind of answer to this question.   


 How your home sale will affect your taxes depends on a variety of different factors, which is why it’s wise to work with a tax adviser who will look at your situation individually and give you advice accordingly.

With that said, though, there are some basic things you should know.

Tax-Free Profits?

You may have heard that any profit you made from the sale of your home is tax-free. Most people get very excited when they hear the news, but, unfortunately, it doesn’t apply to everyone.

Tax-free profits, however, can be a reality for people who live in their homes for at least two years before selling them. There are limits, though, as to how much of a profit can be counted tax-free, with a lower limit for single people and a higher one for married couples.

This “tax free” opportunity can be used any time you sell a primary home up to once every two years.

Secondary Homes

If you’re one of the growing number of Americans who owns more than one home, then you can still enjoy tax-free profits on any secondary home that you sell. Secondary homes are homes that you do not live in for the majority of the year and that you use infrequently or as vacation or guest homes.

To enjoy the tax break on a secondary home, however, you would need to begin using it as a primary home and meet the “two year” rule, as described above, before you sold it. The IRS may ask you to prove that you used the home as a primary residence, so fight any temptation to fib; it’s not worth it.

Also bear in mind that, even if you do meet the two year rule, less profit can be deducted from the sale of secondary homes. The amount you can exclude from taxes, however, is dependent on a variety of factors, so, as always, check with your tax adviser before making any big decisions.


As you can see, selling a home is a major event, at least as far as your taxes are concerned. There are many other rules, regulations, and considerations to keep in mind other than the ones mentioned here, though, so make sure you seek some professional help as you go through this complex process. Getting help from a tax expert will ensure that the sale of your home ultimately benefits you as much as possible.