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A fairly common question among sellers of real estate is whether they will owe taxes on proceeds of the sale of their home. Currently if a home owner has lived in the real estate as a primary residence for two of the last five years the gain is not taxable.

Now, we have a congress contemplating tax reform and they have everything on the table. Everything seems to be those items that affect regular Main Street folks when it comes to eliminating tax rules that benefit them. Loop holes such as carried interest the very wealthy utilize is safe. What is not safe is the contemplation of eliminating state and local taxes, medical expenses, student loans, teacher expenses for supplies as deductions to name a few.

Another item being considered is making the non taxable proceeds from a real estate sale having lived in the property FIVE OF THE LAST EIGHT YEARS vs two of the last five.

This change would have a huge impact on many sellers since something like a home owner being transferred could result in a big tax bill on the proceeds of the real estate sale. Or, perhaps a borrower outgrows a home in less than five years. The tax liability could prevent them selling when they need to, particularly if the home has not gone up in value by much. Also, we are in a really tight inventory market now and have been for some time. Constricting the inventory would be ill advised.

While the tax bill has not passed and is not law it is prudent to pay attention. Proceeds are not taxable when you sell your home and have lived in it two of the last five years currently. Here's hoping this doesn't change. 





Comment balloon 0 commentsDora Griffin • November 17 2017 05:03PM