Real Estate Tips

Taxable Profits
If you are thinking of selling your home and your house has risen in value since you purchased it, or you have accumulated a lot of deferred profit from previous sales, the new tax law passed in August of 1997 could be of tremendous value. Prior to this new law, when a homeowner moved to a smaller home, relocated to a less costly area, or made a decision to rent, they were left with unfavorable tax consequences. The old tax law allowed people who sold their homes to defer tax on any profit by buying a replacement home of at least equal value within two years. At age 55, they could permanently escape tax on up to $125,000 of profit, but any profit over that was taxable unless a new home was bought. The good news is, starting with homes sold after May 6, 1997, homeowners will be able to make as much as $500,000 tax-free profits on the sale of a principal residence for joint filers or $250,000 for single filers. The $500,000 capital gains exclusion will remove taxes as a consideration for most home sellers by giving them flexibility to trade up or down. It will also allow them to preserve the savings value of a home when they sell, provided they used the property as their principal residence for two of the prior five years. Consult your tax advisor for your particular circumstance.