Q: I sold a home that I’ve occupied as my primary residence for the last four years. Do I have to pay taxes on the profit?
The home was sold in Maryland, the home was my primary residence and I occupied the home continuously from 2015-2019
A:
Assuming the other requirements of the personal residence exclusion are met. You exclude the first $250,000 ($500,000 if you are married) in gain on the sale. If you bought the property for $100,000 and you sell it for $350,000 you would have $250,000 in gain and that would be excluded from tax and so you wouldn't pay any tax. If you exceed the exemption you'll pay tax on the difference at long-term capital gains rates.
The important thing is you report it on your return. List the sales price, less the adjusted basis (what you paid for it), and then subtract the exclusion amount.
I often get clients with letters from the IRS where they sold the property and didn't properly report the sale. The IRS only sees that you received the gross sales proceeds and they don't have the adjusted basis and that it was a peed residence so they send you a very large tax bill.
Jeffrey "Anton" Collins agrees with this answer
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A:
I do agree with Attorney Blackburn.
When you file your return, please make certain that you supplement Form 1040, Schedule D and Form 8949, to include a statement that references 26 U.S.C. § 121 - U.S. Code - Exclusion of gain from sale of principal residence. Be certain that you read the statute, and provide this information to your tax return preparer, as well.
J Anton
StopIRSproblem.com
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