If you sell your main home or primary residence, up to $250,000 may be excluded from your income.  The amount jumps up to$500,000 for married couples that sell their primary residence.

In order to meet the primary residence exclusion requirement you must meet the following requirements:

If you are married you need to meet the following requirements:

The required 2 years of ownership and use during the 5-year period on the date of the sale do not have to be continuous.  You meet the IRS tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 x 2) during the 5-year period ending on the date of the sale.

Example 1 – Home owned and occupied for 3 years

Kim bought and moved into her main home in September 2006.  She sold the home at a gain on October 12, 2009.  During the 5 year period ending on the date of the sale (September 16, 2006 – October 12, 2009), she owned and lived in the home for 3 years.  Kim meets the ownership and use tests above.

Example 2 – Met ownership test but not use test

Carlos bought a home in 2004.  After living in it for 6 months, he moved out.  He never lived in the home again and sold it at a gain on May 15, 2009. He owned the home during the entire 5 year period ending on the date of the sale (May 16, 2004 – May 15, 2009).  However, he did not live in it for the required 2 years.  Carlos meets the ownership test but not the use test.  He cannot exclude any part of his gain on the sale, unless he qualified for a reduced maximum exclusion . (source: www.real-estate-owner.com)

Will you pay capital gains tax on the sale of your primary residence?    Decide what strategy is best for you and think about how to increase your bottom line!

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oXYGen Financial, Inc. co-CEO Ted Jenkin  is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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