Selling your home marks a significant milestone, and understanding the tax implications, especially regarding capital gains, is vital for a smooth transaction without surprises. Let’s take a look at capital gains and what it could mean to your bottom line.
What Are Capital Gains?
In the realm of real estate, capital gains denote the profit realized from selling a property. It’s calculated by deducting the property’s purchase price (adjusted basis) from the selling price. Any surplus indicates a capital gain.
Primary Residence Exemption:
The IRS offers an exclusion for homeowners selling their primary residence. Singles can exclude up to $250,000, while married couples filing jointly can exclude up to $500,000 in capital gains. To qualify:
- Ownership and Residence: The property must have been both owned and occupied as the primary residence for a minimum of two out of the previous five years before the sale.
- Frequency: This exclusion can be claimed once every two years, providing flexibility without overuse.
Capital Gains in Nebraska
Qualifying for the federal exclusion often implies eligibility for the state exclusion on your Nebraska state income tax return.
Exceptions and Special Circumstances
Certain scenarios, like substantial home improvements or partial business use of the property, can affect capital gains calculations. Keeping meticulous records of home improvements can adjust the property’s basis, potentially reducing overall capital gains.
Consulting a Professional
Real estate transactions involving capital gains, multiple properties, or specific circumstances can become intricate. Seeking guidance from a tax professional or CPA well-versed in real estate ensures tailored advice suited to your particular situation.
And Remember
Selling your Nebraska home can be financially rewarding, and understanding the tax implications of capital gains is crucial. Leveraging IRS and potentially state exemptions can significantly affect your tax liability, optimizing your financial gains from the sale.
Stay informed, maintain detailed records, and seek professional advice when navigating capital gains and real estate transactions. This approach streamlines the selling process and maximizes your financial gains from selling your home.
Questions?
Contact me today so I can help answer your questions. I look forward to hearing from you!
