Tax consequences to consider before putting your home on the market

Wednesday, 5 June, 2013

When you sell your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain if you meet certain tests. Gain that qualifies for exclusion also is excluded from the new 3.8% Medicare contribution tax.

Losses on the sale of your home aren’t deductible. But if part of it is rented or used exclusively for your business, the loss attributable to that portion is deductible, subject to various limitations.

Because a second home is ineligible for the gain exclusion, consider converting it to rental use before selling. It can be considered a business asset, and you may be able to defer tax on any gains through an installment sale or a Section 1031 exchange. Or you may be able to deduct a loss, but only to the extent attributable to a decline in value after the conversion.

If you’re thinking about putting your home on the market, please contact us to learn more about the potential tax consequences of a sale.

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The blogs were developed with the understanding that Steiner & Wald,  CPAs, LLC is not rendering legal, accounting or other professional advice or opinions on specific facts or matters and recommends you consult a professional attorney, accountant, tax professional, financial advisor or other appropriate industry professional.  These blogs reflect the tax law in effect as of the date the blogs were written.  Some material may be affected by changes in the laws or in the interpretation of such laws.  Therefore, the services of a legal or tax advisor should be sought before implementing any ideas contained in these blogs.  Feel free to contact us should you wish to discuss any of these blogs in more specific detail.