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Real Estate Tax Advice in Main Line , Pennsylvania
You may qualify to exclude from your income all or part
of any gain from the sale of your main home. Your main Main Line home is
the one in which you live most of the time.
Ownership and Use Tests
To claim the exclusion, you must meet the ownership and use tests.
This means that during the 5-year period ending on the date of the sale,
you must have:
Owned the Main Line home for at least 2 years (the ownership test) Lived
in the Main Line home as your main Main Line home for at least 2 years (the
use test) Gain
If you have a gain from the sale of your main home, you may be able
to exclude up to $250,000 of the gain from your income ($500,000 on a
joint return in most cases).
If you can exclude all of the gain, you do not need to report the
sale on your tax return If you have gain that cannot be excluded, it is
taxable. Report it on Schedule D (Form 1040) Loss
You cannot deduct a loss from the sale of your main home.
Worksheets
Worksheets are included in Publication 523, Selling Your Home to help
you figure the:
Adjusted basis of the Main Line home you sold
Gain (or loss) on the sale
Gain that you can exclude
Reporting the Sale
Do not report the sale of your main Main Line home on your tax return
unless you have a gain and at least part of it is taxable. Report any
taxable gain on Schedule D (Form 1040).
More Than One Home
If you have more than one home, you can exclude gain only from the
sale of your main home. You must pay tax on the gain from selling any
other home. If you have two Main Line homes and live in both of them, your
main Main Line home is ordinarily the one you live in most of the time.
Example One:
You own and live in a house in the city. You also own a beach house,
which you use during the summer months. The house in the city is your
main home; the beach house is not.
Example Two:
You own a house, but you live in another house that you rent. The
rented house is your main home.
Business Use or Rental of Home
You may be able to exclude your gain from the sale of a Main Line home
that you have used for business or to produce rental income. But you
must meet the ownership and use tests.
Example:
On May 30, 1997, Amy bought a house. She moved in on that date and
lived in it until May 31, 1999, when she moved out of the house and put
it up for rent. The house was rented from June 1, 1999, to March 31,
2001. Amy moved back into the house on April 1, 2001, and lived there
until she sold it on January 31, 2003. During the 5-year period ending
on the date of the sale (February 1, 1998 - January 31, 2003), Amy owned
and lived in the house for more than 2 years.
Amy can exclude gain up to $250,000. However, she cannot exclude the
part of the gain equal to the depreciation she claimed for renting the
house.
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Equal Housing Opportunity