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Over the years the tax laws have changed with regards to how the sale of your home is taxed. There were once laws that said that you could rollover the profit from the sale into a new more expensive home. There used to be a one time exclusion on the sale of your home if you were over 65. Those laws are now no longer valid & have been replaced by the current law.

The current law states that if you purchase a home, & live in it for 2 out of 5 years, you do not have to pay capital gains (or any other tax) on up to $500,000 gain for a married filing joint couple or $250,000 gain for a single person. In plain English, this means that if a couple purchased a home for $200,000, lived in it for 2 years & then sold it, they could sell it for $700,000 without paying any taxes on the profit ($450,000 for a single person). There is no limit, you can buy & sell a home every two years with the same exclusion.

What if you do not live in the home for two years? There’re three exceptions to the two year rule.

1. Change in Place of Employment. The IRS says that if you, your spouse, a co-owner of the home, or a person whose main home is the same as yours changes employment, you can still take the exclusion. The employment can be a new employer, the same employer or self employment. The new employment must how ever, be at least 50 mile farther from the home you sold than the old place of employment. The change of employment must take place while you’re living in the home.

2. Health. The IRS says that you can claim the exclusion if you have to move because of a specific medical problem. This can be for a parent, grandparent, stepparent, sibling, step sibling, ½ sibling, mother or father in law, aunt, uncle, nephew, niece or cousin. The move must be to obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness or injury. You can not take the exclusion if you move just because it will benefit a persons general health or well-being unless a doctor recommends the change of residence.

3. Unforseen Circumstances. Unforseen circumstances is an event that you could not reasonable have anticipated before you bought & moved into the property. They include things such as natural or man made disasters, act of war or terrorism, death, unemployment (if you qualify for unemployment), divorce or legal separation, multiple births resulting from the same pregnancy or a change in employment that results in the inability to pay your ordinary living expenses. Unforseen circumstances doesn’t cover if you just prefer a different home or your finances improve or you spend too much to maintain a luxurious life style.

Examples:

Employment: Justin was unemployed & living in a townhouse in Florida that he owned & used as his main home since 2005. He got a job in North Carolina & sold his townhouse in 2006. Because the distance between Justin’s new place of employment & the home he sold is over 50 miles, he qualifies for the exclusion of the gain from the sale of the townhouse.

Health: In 2005, Chase & Lauren, husband & wife, bought a house that they used as their main home. Lauren’s father has a chronic disease & is unable to care for himself. In 2006, Chase & Lauren sell their home in order to move into Lauren’s father’s house to provide care for him. Because they’re moving to care for the father, they qualify for the exclusion.

Christopher Anderson wants to share his success as a business owner with others who desire to own their own business. He also believes that the economy is stronger with more business owners, & as a result, He is focused on helping business owners succeed. http://www.lonepeakbusiness.com

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