Selling Your Orange County CA Home for a Profit - What's That Mean to Your Taxes?
Posted by Leslie Eskildsen on
Monday, October 26th, 2009 at 10:11pm.
So, you are selling your Orange County CA house and walking away with a boat load of cash. What are the Real Estate tax implications you need to be aware of? When you sell your home, you can realize up to $250,000 in profit if you're a single owner, $500,000 if you're married or joint tenants, and not owe any capital gains tax. Anything above that amount, consult your tax professional for more detailed information on your tax liability – as it depends on the length of time you’ve owned the home and your tax bracket. But wait – there’s more! There's no limit to the number of times you can use the home-sale capital gains tax exemption. If you plan and play the game according to IRS rules, you can make tax-free profits of $250,000 (or $500,000 depending on your filing status) every time you sell your home. You can use the money you made tax-free to travel to Europe in style, buy an RV and drive across the country or buy a closet for all of your designer shoes. But most people use the money to buy their next home; be it a move up, a move down, or a move out of town. So what are the IRS rules for tax-free income from selling your home?First, the property you're selling must be your principal residence. That means you live in it. You must own and live in the home for two out of the five years before the sale. So, since you have to live in the home for at least 2 years, you can see that there is a time factor to deal with if you are tying to repeat this process again and again. This principal residence tax break doesn't apply to a house or other property that you have solely for investment purposes. In those cases, the usual capital gains rules apply - unless you conduct a 1031 Tax Deferred Exchange when you sell your income property. More on that topic later! The bottom line is that you can make your home sale work to your tax advantage if you plan ahead and know your facts. Or ask your trusted Real Estate professional – like me! So go out and have a great time selling your Orange County California home and move on to your next adventure!
Leave a Comment
Print
Share
