Tax Issues To Consider When Setting the Price of Your Home

When you’re thinking about selling your home, you should be aware of the tax issues surrounding the transaction.  To ensure that you understand any tax implications, you should discuss them with your tax consultant.

A few issues might include:

• Costs of home improvements which may offset capital gains.
• Whether you claimed a home office exemption on your taxes.
• Costs associated with selling your home.
• Whether you purchased the home yourself or received it as a gift or inheritance.
• How long you have lived in the house and if you are selling it due to unforeseen circumstances (an illness, job relocation, etc.)
• Capital gains on the sale of your home.

In a nutshell, you are exempt from capital gains taxes on the first $250,000 (or $500,000 if married) of profit on the sale of your home if it has been your primary residence for at least two of the last five years.  There are a number of caveats to this rule, so check with your tax consultant to make sure that you understand whether or not you qualify.