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TAX TIPS FOR SELLING YOUR HOUSE

When you plan to sell your house, it is important to consider some basic requirements such as a tax on the amount of your house you are selling. for those who are planning to sell their houses, there are certain tips which will help them to abstain from a large amount of tax.

 

 

Not all gains are taxable

Before selling your house see the legalities and qualifications of Texas because all the gains are not taxable. When you are selling your house there are possibilities that Not all of your amount will be taxable. There are certain qualifications for the text which are as follows:

 

  • If the selling property is your primary residence i.e., you are living in that house for the last five or more years before the date of sale.
  • The property was not going through any exchange during the last five years
  • Consider the claims of exclusion you make on your house during the last two years before selling your house

You may be qualified for a reduced exclusion

 

In some cases, you are excluded for the text of all the amount but in some cases, you don’t qualify to exclude the full amount of your profit but still, a portion may be tax-free.

 

Reduced exclusion offer when you sell your house because of change of your employment, change of health, or because of any unforeseen circumstances like divorce birth of multiple babies, etc.

 

In these circumstances. When you change your house because you don’t have enough space for your growing family or other circumstances, IRS still allows you to exclude some profit it’s just a little less than the full exclusion amount.

 

Not all selling houses need to be reported on your tax return

 

You can avoid paying taxes by signing every debit or statement stating that the selling amount is not that enough to pay tax. In that case, if you sign that if it debits the closing agent typically won’t send a form of 1099-S to you. In this case, you do not need to pay the tax amount.

 

But if you receive a form of 1099-S, in that case, you are liable to pay the tax. and if you get that form you must pay the tax even if you are not the one who needs to pay.

 

You may have to pay back your first-time homebuyer credit

 

If you purchase a house many years ago and took advantage of the first-time homebuyer credit, you have to pay back the credit of that house. but if you purchase a house for many years and sell that house or stop living in the house before 36 months then you need to pay a small amount of tax.

 

If you live in two homes, only one is eligible to exclude from income

 

If you have more than two houses, you are not liable to pay the tax of your main house in which you are living. your main house is that house on which your mails and bills are identifiable. the place with which your bank, membership of your clubs, and religious organizations are linked.

 

If you did not live at the home, you may have to pay tax on your gain

 

There is another situation in which you are not living in the house but you have to pay the tax. In this case, the market value of your house increases if you earn money in the form of rent from that property. So, in that case you have to pay the tax of the amount of rent which you earned from the house or income starting at the time you rented it.

 

You can choose not to exclude the gain from the sale

 

If someone is expecting to sell his primary house the house in which you are living within two years, you may want to consider claiming the gain on the sale are you get excluded. you can only claim an exclusion on your sale once in two years on your main house in which you are living.

 

In case you are planning to sell another house in two years then you can exclude your gain for the sake of claiming it for the future.

 

Members of the uniformed services, foreign services, and intelligence agencies

 

If you are a member of uniform services, foreign service is an intelligent service you can have some time as a test before living in the house for five years. this will help you to assign two years before living in that house during the five years be for sale.

 

You can have this opportunity if you are qualified for extended duty for more than 90 days or for indefinite. But there are certain conditions for that

  • If your duty station is 50 miles or more away from your main house
  • If you are residing in a house allocated to you by the government.

 

Tax on a cost basis and net sale price

 

There is a big difference between the cost basis and net proceeds. tax is applicable only on the Gain of the house. The gain amount is the amount you get after subtracting the original amount from your selling amount.

 

So, you just need to pay the tax on the gain amount. For example, if you purchase the house for $300,000 and you sell that house for $350,000. You spend $20,000 on selling expenses and other cases then your total gain will be $30,000 and you have to pay the tax of $30,000.

 

IRS classifies capital gains in 2 categories

 

  • Short term capital gains occur when you have owned an asset for a year or less

 

  • Long-term capital gains occur when you have owned the asset for longer than one year. Long-term gains are taxed at the rate of zero percent 15% or 20% depending on your overall taxable income.

 

Update your address with IRS

 

You should update your address in IRS after selling housing by filling a form of 8822, change in address. If your address is updated, it will help you to receive your mails of tax refund.

 

 

 

 

 

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