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Know Your Taxes

1) Consult with Your CPA or Accountant Prior to Selling

If you’re preparing to sell your home, it is recommended to consult with your CPA or a tax professional. They can help you navigate the complexities of capital gains tax and develop a tax-efficient strategy tailored to your individual circumstances.

 

2) Find Out What You Can Exclude

Profits from the sale of a home are subject to capital gains tax. Fortunately, the IRS allows home sellers to shield a portion of
what they earn from taxation. You can sell your primary residence and be exempted from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. To qualify for the home sale exclusion, 
you must have used the home you’re selling as your primary residence for two of the past five years.

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3) Figure Out How Much Gains from Your Home Sale

First thing first, you need to know approximately how much
you’re gaining from your home sale in order to figure out 
how much profit you can exclude from your income to lower your tax burden. The amount you’re paid at closing might not reflect your net proceeds. To know what you'll net from selling your house, you’ll need to subtract all the expenses that’ll reduce your net proceeds. You’ll need to include deductible closing costs like
points, prorated property taxes, agent’s commission, title,
escrow fees and expenses for any repairs
you’ve made, etc. 

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4) Check if You're Qualified for Partial Exclusion

Even if you can’t qualify for a full $250,000 or $500,000 home
sale exclusion, you might be
able to qualify
for a partial exclusion.
If you lived in the home for three-quarters
of the required two-year period, you might
be able to exclude three-quarters of your gains under certain circumstances ( job relocation, natural disaster

or needing to sell ). You could also qualify for a partial exclusion
if you’re getting divorced and you own a
home with your
soon-to-be ex-spouse.
Assuming you both lived in the home for
at least two years, you could
divide the gains between yourselves and claim the exclusion when you file your taxes. Consult with

your accountant.

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5) Consider Lowering the Sale Price 

Lowering your home sale price may also reduce your tax bills.
Best advice to consult with your
CPA and
figure your
capital gains tax prior to putting your house on the market.

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