Video:Common Taxes for Selling a Home

Transcript:Common Taxes for Selling a Home

Hi, I'm Brad Meehan and I'm going to talk about common taxes for selling your home, on About.com. So you're ready to move on and start over again, but before you do that, however, you have to sell your home. Not only can this be a long and arduous process, you also have to be prepared for the financial ramifications it can have for you. You may be wondering what kind of tax obligations you will have upon the sale of your home.

Capital Gains Tax

First of all, if you were lucky enough to have made a profit on the sale of your home, you may be wondering if I need to pay capital gains tax. The answer is, it depends. In 1997, the Tax Payer Relief Act was passed, this allowed tax payers to avoid paying taxes on a significant portion of the sale of their home. $250,000 for a single person and $500,000 for a married couple, which means that you must have paid a joint return and both lived at the same address for a requisite time.

Examples of Capital Gains Tax

If you're a single man meeting all qualifications, and you bought your house for $200,000 and you put in $20,000 worth of work. Now it's two years later and you sell your house for 500,000 dollars. You made a profit of 280,000 dollars. You only have to pay capital gains tax on $30,000 of that. If you're married, you don't have to claim a thing because $280,000 is far less that $500,000. Before you take your check to the bank, you must have lived in your house for 2 of the last 5 years before the date of the sale, and not have sold another property in the last two years.

Certain Tax Exemptions

However, in 1998, they allowed a few exceptions that would allow exemptions be pro rated should certain circumstances force a move. These circumstances are: Change in employment; Change in health; Divorce; Multiple births from the same pregnancy; And certain other unforeseen circumstances. Now, you're still not totally off the hook. If you sold a house before 1997 and postponed the tax payment, you're responsible for it now. Also, if you bought a house in 2008 and took the 7500 credit and were repaying it in installments, you are now responsible for the payment of it now in full upon the sale of you're home.

Other Tax Considerations

If you took a credit in 2009 or 2010, you will not have to pay that back unless you are selling less than 36 months after you took the credit. You will need to re-pay it upon the receipt of your tax returns. Most states will have similar guidelines to that of the federal government. You should also check with a tax specialist who's familiar with the tax laws in your area, when you are dealing with an asset as large as your home.

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