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Peter Griesch
Peter Griesch,
Category: Tax
Satisfied Customers: 324
Experience:  Tax Counsel at AIG, Inc.
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I recently sold my home where I have lived years. I also ran

Customer Question

I recently sold my home where I have lived for 12 years. I also ran a very small business out of around 600 sq feet for the last 4-5 years. What liability will I have this tax season.
Also, I did not close until late August 2015
Submitted: 1 year ago.
Category: Tax
Expert:  Peter Griesch replied 1 year ago.

Thank you for your inquiry. If you give me a few minutes, I will write a response to your questions.

Thanks.

Expert:  Peter Griesch replied 1 year ago.

You may exclude from capital gains tax up to $250,000 gain (up to $500,000 if married and filing jointly) if the following is true: 1) You owned the home and used it as your main home during at least 2 of the last 5 years before the date of sale (you seem to qualify); 2) You did not acquire the home through a like-kind exchange (also known as a 1031 exchange), during the past 5 years (you seem to qualify); and 3) You did not claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.

This means that up to the above amounts, you’ll have no tax liability from the sale.

In the past, the IRS took the position that if a principal residence was used partially for residential purposes and partially for business purposes (mixed-use property), any capital gain on the sale of the house would have to be prorated. Only the part of the gain allocable to the residential portion was eligible for exclusion. Now, however, under current regulations, so long as both the residential and non-residential portions of the property are within the same dwelling unit (e.g., one room in the home is used as a home office), all of the gain from the home sale (except for gain resulting from certain depreciation deductions) is eligible for the capital gain exclusion. However, gain is allocated if the business portion of the home is separate from the dwelling unit (e.g., an office in a converted detached garage).

So, unless you’ve taken depreciation deductions on the business, there will be no tax owed up to the above mentioned amounts.

Expert:  Peter Griesch replied 1 year ago.

If you have any follow-up questions, please let me know. If not, please remember to rate my response. I only receive credit from Just Answer if my response is positively (three stars of more) rated.

Thank you.

Expert:  Peter Griesch replied 1 year ago.

If you have any follow-up questions, please let me know. If not, please remember to rate my response. I only receive credit from Just Answer if my response is positively (three stars of more) rated.

Thank you.

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