Twenty fourteen proved to be a great year for real estate. Sellers gaining momentum in the market finally upsurged, and with that the real estate industry is once again on its top game (locally, at least). Some, after a long and agonizing delay, have opted to take part and ride the rising real estate wave, buying into investment properties that were once viewed as extremely risky, especially because of the recession. Nowadays however, more and more people are disposing of their assets in the hopes of fetching a better-than-expected offer for their once unsellable home, and for good reason - as local market data has shown that properties are fetching a hefty margin above asking price.
And if you're one of the lucky few who have held on to their investment property and is currently considering its sale, or have recently sold off property, then you've definitely pick the right time. One important thing to note though, is that the sale isn't the end of your real estate romance, as tax season awaits you and (your check!) this month.
There are numerous ways and instruments out there to help ensure that you're not overpaying (or underpaying) your taxes. And to further aid you in your ordeal, the IRS has recently issued a helpful list of aid you in your tax filings as a recent home seller.
10 Tax Tips Homeowners Should Keep In Mind When Selling
1. You are usually eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.
2. 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).
3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.
4. If you can exclude all of the gain, you do not need to report the sale on your tax return.
5. If you have a gain that cannot be excluded, it is taxable. You must report it on Form 1040, Schedule D, Capital Gains and Losses.
6. You cannot deduct a loss from the sale of your main home.
7. Worksheets are included in Publication 523, Selling Your Home, to help you figure the adjusted basis of the home you sold, the gain (or loss) on the sale, and the gain that you can exclude.
8. If you have more than one home, you can exclude a 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 homes and live in both of them, your main home is ordinarily the one you live in most of the time.
9. If you received the first-time homebuyer credit and within 36 months of the date of purchase the property is no longer used as your principal residence, you are required to repay the credit. Repayment of the full credit is due with the income tax return for the year the home ceased to be your principal residence, using Form 5405, First-Time Homebuyer Credit and Repayment of the Credit. The full amount of the credit is reflected as additional tax on that year's tax return.
10. When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive refunds or correspondence from the IRS. Use Form 8822, Change of Address, to notify the IRS of your address change.
David Paez has been successfully in the business of buying, selling, and renting homes in Boston for over seven years. He is actively aiding willing sellers in disposing their investments. List your home now and reap the financial rewards! Call David at (617) 549-9783 and schedule a no frills risk-free consultation and find out he can get you the most return on your investment.