Selling a home is an exciting milestone, especially when it comes with a hefty profit. But let’s face it, the thought of handing a significant chunk of that money to the IRS can feel like a buzzkill. The good news? There’s a tax break designed to help homeowners keep more of their hard-earned equity: the personal home sale exclusion. Let’s break it down.
What Is the Personal Home Sale Exclusion?
The personal home sale exclusion is a tax benefit that allows homeowners to exclude a substantial portion of their capital gains from taxation. If you’re single, you can exclude up to $250,000 of capital gain. Married couples filing jointly? Your exclusion doubles to a whopping $500,000.
Who Qualifies for This Exclusion?
While this tax break is generous, there are a few key rules to qualify:
-
Ownership and Use Requirement:
-
You must have owned and lived in the home as your primary residence for at least two of the last five years.
-
The two years don’t have to be consecutive, so it’s okay if you moved in and out during that time.
-
-
Frequency Limitation:
-
You can only claim the exclusion once every two years. If you’ve already taken advantage of this tax break within the past two years, you’ll need to wait before claiming it again.
-
Pro Tips for Claiming the Exclusion
-
Work with a Tax Professional: Navigating tax rules can be tricky, and it’s easy to overlook details that could save you thousands. A knowledgeable tax preparer can ensure you’re filing correctly and maximizing your benefits.
-
Keep Records Handy: Document your home’s purchase price, improvement costs, and any other relevant expenses. This information will help determine your total capital gain.
Why It Matters
By understanding and utilizing the personal home sale exclusion, homeowners can retain more of their profits and reinvest them into their next dream home, retirement, or other financial goals. Don’t let tax worries overshadow your success—take advantage of this benefit and celebrate your smart financial move.
Final Thoughts
If you’ve recently sold your home or are planning to sell soon, now is the time to educate yourself about this exclusion. Questions? Our team at The Jenkins Group is here to help connect you with trusted tax professionals and guide you through every step of your homeownership journey. Let’s ensure you keep more of what you’ve earned!
