Expert: Dick Dennis - 3/1/2005

Question
We are selling our home. If sold around the asking price, and after closing costs and agent commission, we stand to make a profit estimate of $40K.   We have made thousands of dollars worth of improvements on this house as well but it's been so long, we don't have many receipts. We're moving to a new state (that has no state income tax) and will probably not buy a home until after a year. Do we have to pay an income tax on that if we don't buy a home right away? Are there any other tax factors involved? Sincere thanks for help on the subject.


Answer
Internal Revenue Code 121 says you do not have to pay any capital gains tax on your home as long as you have lived in it (and made it your primary home) for two of the past five years up to $250,000 ($500,000 married couple filing jointly).

Simple as all that, Paula. If you haven't lived in your house at least in the past two consecutive years, then you may have a taxable event when you sell.

I am assuming you have lived in it for at least two years. So you can forget about your receipts. By the way, if you file your tax return with a preparer, that person should know that and guide you accordingly. If you file your return with TurboTax or TaxCut you don't have to worry either. It does it automatically for you.

I do wish you well, Paula

Dick Dennis    dixiedee13@aol.com