A disappearing opportunity

a disappearing opportunityOver the last several years during the real estate recession, some homeowners who couldn’t sell their home decided to rent it instead. You may be one of these people. Now that the real estate market has turned around in most areas, that same home may now sell and bring a higher price.

With all forecasts looking like the real estate market will continue to do well, the chance to sell the home will continue to be good. However, there is another opportunity for the homeowner that might quickly dissolve.

The capital gain exclusion on the profit of a sale of your primary residence is up to $250,000 for single taxpayers and $500,000 for married filing jointly. But you must own and have used your home as your primary residence for two out of the last five years.

As the homeowner, you can rent your home for up to three years and still be eligible for this exclusion. For example, if you have owned and lived in a home for two years and then decided to rent it for up to 2 ½ years, you would need to sell and close on the home before the remaining six months ran out.

By selling the home, if you gained a $200,000 profit that didn’t meet the exclusion, you would be hit with a 15 percent long-term capital gain tax of $30,000 depending on your tax bracket. But if you plan carefully, you can avoid this tax. Being aware of your time frames and getting assistance from your tax and real estate professionals can save your equity. Contact me today if you are in this situation and need help selling!

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