Home Sale Tax Exemption Loopholes
Profit Ability Article Highlight

Just about everyone has heard of the IRS rule allowing joint filers to realize $500,000 in tax free income from the sale of a residence. It is also common knowledge that you must live in the home two out of the preceding five years to enjoy this benefit. However, there are some details about this law that may allow you to take advantage of it in some dif ferent ways.

Buy, Live, Rent & Sell: While many people understand this issue, there still exists a fair number of people who do not understand the eligibility requirements for taking th e $500,000 tax-free gain. All you have to do is live in the home for two out of the last five years. So you can indeed still enjoy the tax-free gain if you purchase a home, live in it for two years and then turn it into a rental property. As long as you sell the property within three years of your living there, you are in the clear.

Safe Harbors: Some "safe harbors" exist wherein a taxpayer can take advantage of the exclusion without having owned the home in question for the required time.

• If a taxpayer is required to move for a workrelated reason and the new place of work is at least 50 miles farther from the old home than the old workplace was from that home.
• A sale will be considered if it is due to health issues including disease, illness, or injury of a qualified person or certain close relatives. A physician's recommendation is necessary.
• A sale will be considered necessary if due to "unforeseen circumstances" such as divorce, death or legal separation, natural or man-made disasters and other financial hardships.

If you have questions on this issue, please feel free to contact our firm's offices at 714.937.6337. If you prefer, we can be reached via e-mail at info@talleynco.com.