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levr
levr, Tax Advisor
Category: Capital Gains and Losses
Satisfied Customers: 28082
Experience:  Working for a large tax preparation service
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How does capital gains works when you sell your house

Customer Question

How does capital gains works when you sell your house
Submitted: 6 months ago.
Category: Capital Gains and Losses
Expert:  levr replied 6 months ago.

The first step is to calculate if you realize any gain on the sale?
The gain is calculated as (selling price) MINUS (adjusted basis) MINUS (selling expenses)

The basis is the original purchase price.

That basis is adjusted by improvements and some other items.

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If you realize the gain - we need to verify eligibility to exclude the gain.

You can exclude up to $250,000 of gain ($500,000 if married filing jointly) on the sale of your home if you meet the Eligibility test.

Determine whether you meet the ownership requirement. If you owned the home for at least 24 months (2 years) during the last 5 years leading up to the date of sale (date of the closing), you meet the ownership requirement.

Determine whether you meet the residence requirement. If your home was your residence for at least 24 of the months you owned the home during the 5 years leading up to the date of sale, you meet the residence requirement. The 24 months of residence can fall anywhere within the 5-year period. It doesn't even have to be a single block of time. All you need is a total of 24 months (730 days) of residence during the 5-year period.

Determine whether you meet the look-back requirement. If you did not exclude gain for selling a home on your tax returns for the previous two years (and you do not intend to do so on any returns or amended returns for the past two years that are not yet filed), you meet the look-back requirement.

Customer: replied 6 months ago.
Do you think writing ogff 250,00 for a house owned for 44 years and had to be almost gutted when bought because of water damage is too high?
Expert:  levr replied 6 months ago.

We do not write off - that is not a deduction.

The gain is excluded from the gross taxable income if all qualifications are satisfied.

Expert:  levr replied 6 months ago.

It doesn't matter how long the property is owned - as long as two-out-of-five tests are met.

If you had a damage - and claimed the casualty loss on your property - the basis must be adjusted (reduced) by the amount of the casualty loss that was deducted.

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If you still have any doubts, need clarification - please be sure to ask.

I am here to help you with all tax related issues.

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