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It’s Your Money
You don’t have to purchase another home with your
proceeds. The money is
not taxable income and can spend the money on anything you’d like.
Beginning on May 7, 1997 the Taxpayer Relief Act
eased, and in most cases erased the capital gains taxes on the sale
of a home.
When you sell your primary residence, you can make up
to
$250,000
in profit
if you’re a single owner, or up to
$500,000
if you’re married,
and you won’t
owe the Internal Revenue Service a single dollar.
There is
no limit
to the number of
times you can use the home sale exemption.
However, each sale must be at least two-years apart in order to
fully qualify. A home seller forced to move within two years will
still benefit from a
pro-rated adjustment
based on the
number of months the seller lived in the home.
Ownership and Use Tests
During the 5-year period ending on the date of the sale, you must
have:
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- Owned
the home for at least two years (the ownership test)
- Lived
in the home as your main home for at least two years
(the use test)
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Reporting the
Sale
Do not
report the sale of your main home on your tax return unless you have
a gain in excess of $250,000, if you’re single, or $500,000 if
you’re married and this is the principal residence for the both of
you.
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