Catch a Tax Break and Put More Money In Your Pocket When Selling Your Home

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Author: Earlvin Harris

Article source: http://www.articledeshboard.com/. Used with author's permission.

Do you want to sell your home? Selling it at a profit can put a lot of money in your pocket and reduce your tax bill, though holding out for the best offer is sensible. You won't need to hold out for the best offer if you have taken advantage of mortgage management tools that enable you to accelerate the building of equity in your home. Using a good mortgage management tool can put you ahead and put even more money in your pocket when you sell, regardless market conditions.

Did you know When you sell your home and make a profit, the first $250,000 can be excluded from your taxes? In additon, married couples who file jointly can increase their profit exemption to $500,000. This is one capital gain that works in your favor.

There are some stipulations on this big tax break, though. First of all, you have to have lived in the primary residence for at least two of the last five years. Typically this tax advantage can only be used every two years. Most people don't move that often, so sticking to that stipulation isn't usually a problem.

Occasionally people have reasons that cause them to sell their homes after living in them for less than two years. One reason could be a change in job. You do not have to make the change because the employer is leaving the area. The reason could be that you found a brand-new job with a different company.

Health issues could be the cause of leaving behind the residence prematurely. This is a credible reason but the IRS will require the reason to be substantiated by a physician to get the tax break. The letter is for your own records in case you are ever audited.

Some people are forced to sell their homes because of natural disasters. As long as your circumstance meets the guidelines put in place by the IRS, you can use that on your taxes to claim this exclusion. There are various situations that qualify as unexpected: natural disasters, terrorist attacks, war, divorce, death, separation from spouse, or multiple births.

All of these things can net you a partial benefit of this exclusion on your taxes. To calculate how much you will be able to deduct, divide the number of months that you lived in the house by 24. The resulting figure is then multiplied by the amount of the full exclusion you would have been entitled to. The result is the amount of capital gain you can deduct from your taxable income.

Selling your home can lower your taxable income in the next year when it is time to file your return. To learn more about this exclusion, go to the IRS website and view Tax Topic 701 on the sale of your home.

Earlvin Harris is recognized as an expert wealth coach, author, speaker, entrepreneur and teacher. He enjoys spending his time coaching others how to go from "broke" to millionaire lifestyles. Homeowners, visit www.MortgageFreeClub.net, click the yellow video play button and get a free mortgage analysis and learn how you can be mortgage free in 1/3 to 1/2 the time, without refinancing, without increasing your mortgage payment and without any change to your monthly budget.