Capital Gains Tax
Advice Regarding your IRS Return
The capital gains tax applies to any property that you sell for profit, unless that property has been your principle residence for two years or more. If you sold a property this year and you lived in it for two years or more you can exclude up to $250,000 ($500,000 for a married couple) of the gain on the sale from your income tax. That's the simple part.
In recent years, the laws have changed from the old "once in a lifetime" proviso. Other misconceptions about this law say that you have to be a certain age or have a house of a certain value level.
Some tax specialists advise that hypothetically you can now claim the capital gains tax every two years if you move frequently. Or, you can simply avoid the capital gains tax by purchasing speculative residences every two years (if you're very adventurous, that is).
You may also consider this possibility set forth by some savvy analysts. If you own several residences you simply need to sell these two years apart. Take up residence (even if that means living in an apartment for part of the year) then sell the property two years after.
For more information look in the IRS website. "Home Sale Exclusions" are discussed in detail in the taxes FAQ section. Take a look at depreciation as well. All gains made might not be excluded from the capital gains exemption. Any depreciation claimed after May 6, 1997 may be "subject to recapture." Again, see the IRS site.
In any case, the Capital Gains tax suffers some misconceptions. If you made profit from the sale of a property, that was your principle residence for more than two years, you (and your partner) will not have to pay tax on that profit unless it is over $500,000.
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