Now this sounds great, and it is for a lot of people. Here, we go with the
1. If, in the past five years, you have used your home for yourself, for at least two years, as your main home up to the point of sale, for the most part, you are eligible to exclude the gain from income prior to the date of its sale.
You might be able to exclude up to $250,000 of that gain from your income and up to $500,000 for a joint tax return in most cases.
2. You can't get a full exclusion if you already excluded the gain from the sale of another home during the 2 year period before the sale of your home. That isn't bad considering that most people don't sell their main home that often anyway.
3. This part is great. It works out that if you can exclude all of the gain, you don't need to report the sale of your home for taxes on your return.
5. Publication 523 has worksheets to help you to figure what the adjusted basis is on the home you are selling, the gain or loss on the situation and what gain can be excluded.
6. Some folks have more than one home, and in those cases you can only exclude a gain for the main home which is the one that you live in the most. The other homes might carry a taxable income of money from the sale of it.
Check publication 523 for information about rules that apply to someone who bought the home with a first time home buyers credit.
7. People sell their homes and then move elsewhere. So let the IRS know where you are going by filling out Form 8822, a change of address form for the IRS and don't forget the Post Office.
Don't forget to check the Form 8822 and publication 523 available on this site for more information about tax deals and how to deal with the law as it stands for paying or not paying a tax.
Roger Chartier - The Author