for married joint filers) is tax free as long as the homeowner owned the property for two years and lived in it for two of the five years before the sale. Please note this important stipulation, it is worth repeating, you can not qualify for the $250,000 tax free gain ($500,000 for married joint filers) unless you have lived in the property for two of the five years that you have owned the home.
If you sell before meeting the ownership and residency requirements, you will owe tax on any profit you make. The IRS provides some tax relief if the sale is because of a change in the owner's health, employment or unforeseen circumstances. In these cases, the tax-free gain amount is prorated.
And a ruling by the IRS in late 2002 could put more dollars in homeowners' pockets when they must sell before they qualify for the full tax break. The Treasury has defined the unforeseen circumstances that often force homeowners to sell and under which they now can get some tax relief. They include:
Death,
Divorce or legal separation,
Job loss that qualifies for unemployment compensation,
Employment changes that make it difficult for the homeowner to meet mortgage and basic living expenses, and
Multiple births from the same pregnancy.
Obviously, while both of these examples are over-simplified, as most people=s individual tax circumstances can vary substantially, they are solely used to illustrate how homeownership can be a great tax savings tool during the time period that you own your home and when you sell. The best person to advise you on tax matters is a licensed certified public accountant. I recommend that you contact your tax professional for tax advice before you buy, it might make all the difference in determining which house you make an offer on!
Furthermore, although not tax related, owning your own home especially in the last few year=s appreciating real estate market, has contributed to many homeowners finding that the value of their home equity has doubled or tripled during this time period. The 2000 U. S. Census Report on Net Worth and Asset Ownership of Households has determined that approximately 70% of the average American=s net worth at retirement age is comprised of the value of their home equity. While this rate of appreciation has definitely cooled down in many real estate markets in recent months, in others it still has shown a healthy appreciation rate. Your best way of finding this information is by speaking to a professional realtor who can advise you on your local real estate market.
Considering all the above factors, it is no wonder that it is no wonder that the U.S. Government wants you to own your own home.
for more information visit http://www.nefcortez.com
Nef Cortez has been a licensed real estate broker and has held various positions in the real estate industry for over 25+ years. Visit his website at Chino Hills Real Estate for information on foreclosures.
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