North Woods Real Estate Millinocket Maine
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.
80 Penobscot Ave, Millinocket, Maine 04462 - Phone: (207) 723-9086 - Fax: (207) 723-2092
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