|
BUY MYSELF
Getting the Best
Introduction
Choose Your Agent
Agent Representation
Due Diligence
Terminology
Mutual Respect
Expectations
Share Your Feelings
Get Organized
Know the Staff
Show Stoppers
Get Your Home Ready to Sell
Discount Brokerage
Attitude & News Home
Directories
Int'l Realty
US Realty
|
 |
[an error occurred while processing this directive]
INTERNATIONAL REAL ESTATE DIGEST
How Do You Spell Relief?
Uncle Sam's Gift to Home Sellers:The Taxpayers Relief Act of 1997
By
, USA
It's tax season again and our thoughts turn to the great American tradition of settling our debts with Uncle Sam.One of the big changes this year is how you handle the capital gain on your home sale.Many people still haven't heard about this gift from Uncle Sam so it bears repeating.
If you have been thinking about selling your principal residence but dreaded the thought of going through all your receipts and records on expenditures and home improvements, take heart.
Unless your capital gain exceeds $500,000 (married filing joint return) or $250,000 (single), there is some good news.The new tax bill which applies to sales of principal residence homes since May 7, 1997, grants signficant exclusions to capital gains penalties and lowers the tax rate from 28% to 20% (and from 15% to 10%) for taxpayers who do exceed the capital gain exclusion.
The new law replaces two rules that you may not know have changed:
- You are not restricted by the old roll-over requirement of buying a new home of equalor greater value within 2 years of the sale of your primary residence to defer the capital gain.
- You do not have to be over 55 years of age for a once-in-a-lifetime exclusion of $125,000 of gain because this rule is no longer valid.
Once the baby boomer generation of home sellers are aware of this new law and they realize the tremendous freedom they now have to sell their principal residence, expect to see some new trends.
Since they no longer will be penalized for not buying a new residence of greater or equal value, some boomers may decide to downsize or rent.And, since they no longer have to be 55 years old to take advantage of a capital gain exclusion, boomers 50 years old and up may consider downsizing earlier.Imagine, no more push to buy a home more expensive than you want or need!
Consider the effect of this new tax law on relocating transferees, divorcees, and people who like to buy homes to fix up and sell.
- When employees are relocated and they move from a high price market to a lower price market, they don't have to worry about finding a home that cost more than their current home.
- The divorcees can buy a less expensive house or condo without being penalized with capital gains tax payments.
- Fixer-upper homes may become more desirable to people who are handy and can move in for two years while they fix up the home.By building sweat equity and selling two years later, they can move up to a better home or find another fixer-upper.
There are some stipulations you should know about to take advantage of the new tax change:
- You must have lived in the home, as your principal residence, for two of the
five years prior to the sale.
- You can take advantage of this exclusion each time you sell a house as long as
you do not sell your principal residence more than once every two years.
- The home must be considered your principal residence at the time of the sale.
IRS Publication 523, Selling Your Home (For Use in Preparing 1997 Returns) reflects the changes in rules.This free report can be ordered by calling 1-800-TAX-FORM (1-800-829-3676).
For a copy of a booklet entitled Questions and Answers for the New $500,000 Home Sale Exclusion, authored by the National Association of Realtors in 1997, send an e-mail to taxes@housebuyer.com
As with all tax matters, discuss your particular situation with your tax advisor to see if your financial picture can improve by taking advantage of Uncle Sam's gift to home sellers.
|
