Personal Residence Capital Gain Exclusion

Gaining on the Sale of Your Home

When you sell your home, the IRS allows you to exclude gain on the sale from taxable income, up to $250,000 ($500,000 if you're Married Filing Jointly and you both meet the use requirement).

Homeowner Deductions

The property you're selling must be your principal residence. That means you live in it. This tax break doesn't apply to a house or other property that you have solely for investment purposes. In those cases, the usual capital gains rules apply.

You can, however, turn a rental house into your primary residence, making the sale of it eligible for the exclusion. This is accomplished when you meet the IRS use and ownership tests: You own and live in the home for two out of the five years before the sale.

Now I don't know about you but if your someone that moves around a lot this could be a great way to put some large tax free chunks of change in your pocket. Actually this could be a good living all in itself, imagine making 250 to 500K every other year that is tax free. Now there is a lot of investment research that needs to go into this to insure your buying the right property in the right place to be able to convert fro the big cash obviously. But what a great way to boost your net worth if your into this sort of thing.

Principal Residence Deduction

You can claim the exclusion if you own and used the home as your main residence for at least 2 years during the 5-year period ending on the date of sale. You may claim this exclusion only once in any 2-year period.

If you don't meet the 2-year requirement, you may be eligible to claim a reduced exclusion, if you sell your home because of an unforeseen circumstance, such as a change in employment or a divorce. A loss on the sale of your home, however, isn't deductible.

Exclude gains on the sale of your home from taxable income, up to $250,000 ($500,000 if Married Filing Jointly).

This economy has left our home values in shambles but, this may be the perfect scenario for those looking to make a killing on a personal residence write-off. There are areas of the US that are not feeling the impact of the recessions as much as others, but you need to look around to find the best spot to reinvest for a 2 year home flip. It's not an easy guess but it could put some serious tax free cash in your pocket over the short term...

Buying a home is a great way to reduce your income tax. The qualified mortgage interest points and origination fees you pay and your real estate taxes are all deductible. see more on mortgage interest deductions

When the housing market comes back there are going to be good profits in some of the hardest hit areas of the price collapse. My advice is to find somewhere where you find great appeal in a community that looks like it will grow well in the future. Demand will be your biggest friend when it comes time to sell. You want to be where lots of buyers are going to be looking to buy their next home.