• AMOUNT of exclusion. When you have gain from the sale of your home, you may be able to exclude up to $250,000 of the gain from your income. The exclusion amount is $500,000 for taxpayers filing a joint return.
• Ownership test. To claim the exclusion, you must have owned the home for at least two years during the five year period ending on the date of the sale.
• Use test. You also must have lived in the house and used it as your main home for at least two years during the five year period ending on the date of the sale.
• If you fail these tests. If you can’t meet these tests, don’t give up. Work out a reduced exclusion.
The reduced exclusion is available only if any of the following is true:
• Change of job location,
• Health considerations,
• Unforeseen circumstances (includes foreclosure or voluntary conveyance).
• When not to report. If you are able to exclude all of the gain from the sale of your home, you do not need to report the sale on your federal income tax return.
• Consider reporting your gain, even if under the gain exclusion limits of $250,000/$500,000. This reduces your audit profile. You will not pay any capital gains tax anyway.
• How to report taxable gain. If you have gain which cannot be excluded, it is taxable and must be reported on your tax return using Schedule D.
• Deducting a loss. You cannot deduct a loss from the sale of your home.
• Jointly-owned home. If you sell a jointly owned home which is the principal residence of two (or more) single owners, each owner may exclude $250,000.
• Rules for multiple homes. If you have more than one home, you may only exclude gain from the sale of your main home and must pay tax on the gain resulting from the sale of any other home. Your main home is generally the one you live in most of the time.
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Sy Al-os Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies. The firm celebrates its 38th anniversary in 2015.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in 704 Mira Monte Place, Pasadena, CA 91101. He has 50 years of experience in accounting, consulting, and tax work.
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The Firm proudly welcomes Arlene Al-os in 2015. She obtained her bachelors of Science in Accountancy from Mindanao State University and MBA from Ateneo de Manila University. She teaches intermediate accounting at UCLA and was a professor of Economics at Asia Pacific College. She has over 15 years of experience including member firms of KPMG and BDO Seidman accounting firms.
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Our readers may call (626) 744-0200 or email tax questions to [email protected]. Please visit our website for about 300 tax tips at www.victorsycpa.com. (Advertising Supplement)
