Estate Planning & Administration
Tax Law |
| Home | The Firm | Attorneys | Practice Areas | Contact Us | News |
Tax Aspects of Selling your Principal Residence
By John F. Rodgers
The first issue for selling a principal residence is holding period. You must have owned and occupied the residence for at least 2 out of the last five years (730 days). If you have not owned and occupied the residence for that period any gain on the residence will not be excluded.
The next issue is to determine the basis of your residence. You arrive at the basis by taking your purchase price, adding fix-up expenses, closing costs, and other capitalized expenses and deducting any depreciation you might have been allowed (if you rented the property while you owned it).
The next issue is the amount of the exclusion. It is $250,000 ($500,000 for married filing jointly). This means that you add $250,000 to your basis (determined above).
Once you have added together the basis and your exclusion you then subtract that sum from your sales price. If the number is positive, you will owe capital gains taxes on the gain. You compute that on Schedule D of Form 1040. It does not matter if you re-invest the proceeds in a new home.
If you have been renting the property you can decide to do a 1031 Like Kind Exchange. This means that you must buy other real property of essentially equal or greater value than the property you are disposing of. The property must be held for investment or for rental.
We can assist you with either of these issues.
John F. Rodgers has co-authored several books on estate and business planning, and is a member of the Closely Held Business Committee of the American Bar Association Section on Taxation. He has been practicing for 20 years and has been affiliated with the firm since 1993. |
 |
© John F. Rodgers, A.D. 2001 |
|