For most people, retirement feels like a long way off. But, if you don’t start preparing as early as possible, you may find yourself in a place of financial insecurity when the time does come.
The Good News - Bad News About Capital Gains!
Dated: August 21 2020
The good news about capital gains on real estate!
The IRS typically allows you to exclude up to: $250,000 of capital gains on real estate if you're single. $500,000 of capital gains on real estate if you're married and filing jointly.
The bad news about capital gains on real estate!
Your $250,000 or $500,000 exclusion typically goes out the window, which means you pay tax on the whole gain, if any of these factors are true:
- The house wasn’t your principal residence.
- You owned the property for less than two years in the five-year period before you sold it.
- You didn’t live in the house for at least two years in the five-year period before you sold it. (People who are disabled, and people in the military, Foreign Service or intelligence community can get a break on this part, though; see IRS Publication 523 for details.)
- You already claimed the $250,000 or $500,000 exclusion on another home in the two-year period before the sale of this home.
- You bought the house through a like-kind exchange (basically swapping one investment property for another, also known as a 1031 exchange) in the past five years.
- You are subject to expatriate tax.
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