The coronavirus pandemic has remade what’s normal, and home buying is no exception. Typically, the real estate market tends to hit the brakes in the fall, as kids return to school and families
Nov 10 2015 16419 1
Beware home-selling myths
Like many folks, you sell a home only a few times in your life and so likely don't know the potentially tricky rules and laws concerning real estate sales. Here are some half-truths, both new and established.
Recent data say that the average American buys and sells a primary home about every eight years — many move far less frequently — for reasons ranging from wanting a different size dwelling to change of a job. A lot of information about the tax consequences of selling a home fly around the Internet and other sources — some mostly bunk and much of the rest limited in applicability.
Understand a few of these half-truths before you sell your home and how they may or may not apply to your situation.
If I sell, I need to buy another home with the proceeds or owe tax. Untrue as long as you live in the home as your primary residence for two of the preceding five years. An exemption of the tax on such a residence sale permits up to $250,000 ($500,000 for a married couple) of gain in value over the original purchase price plus improvements to the property.
For example, if you purchase a home for $100,000, update the kitchen for $10,000, live in the house for three years and then sell it for $120,000, you realize a gain of $10,000 on the sale. This sale is exempt from tax since you lived in the home as your primary residence for at least the required two years.
Roots of this half-truth reach back to a law, expired in 1996, that when you sold your primary home you needed to purchase a new one within two years with any gains from the sale. Many folks think this stipulation still applies since they haven't sold a home in a long time.
If I sell my home, I owe an extra 3.8% surtax due to Obamacare
. True only in some limited cases. This one gets traction via emails and Internet postings and enjoys a rather long life; I
more than two years ago.
Using numbers in the above example, you might owe the surtax if you wind up with a non-exempt gain on the sale of your primary home. This could happen because either you didn't live in the home for two of the previous five years or the gain exceeded the exempted limit and your modified adjusted gross income exceeds $200,000 for singles or $250,000 for marrieds.
I can write off against income any loss on the sale of my home. Not true for a primary or secondary home. You generally don't pay capital gains tax on a gain when you sell your home. Likewise, you can't take a capital loss if you lose money on the sale.
This applies for all personal property not held for investment purposes. If you sell a rental property at a loss, you can write the loss off against other investment gains.
Changing homes causes enough stress. Know the truths from the myths about home selling before you even stick the sign on the lawn.
Michelle is a native of Southwest Missouri and has twenty-five years of experience in selling real estate in the greater Springfield area! Michelle specializes in all price points, including new const....
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