Priya PatelTLDR:
- A $500,000 tax break is available for homeowners when selling their personal residence.
- To qualify for the exclusion, homeowners must pass three hurdles: main home, ownership, and residency tests.
In the article “Taxes and Finance: The $500,000 homeowner tax break,” James Angell discusses the important tax break that allows homeowners to exclude up to $250,000 ($500,000 married) in capital gains when selling their personal residence. However, it is crucial not to assume that this gain exclusion will always protect from taxes. To qualify for the tax exclusion, homeowners must pass three hurdles: proving that the property is their main home, passing the ownership test by owning the home for two of the past five years, and passing the residency test by living in the home for two of the past five years. Additionally, there are other factors to consider such as record-keeping, special rules for older family members moving into assisted living, and exceptions to the exclusion rules like foreclosure or inheritance. It is important for homeowners to be aware of these rules and plan accordingly to minimize their tax exposure when selling their home.
