Attorney Thomas B. Burton discusses the steps to take to claim the capital gains tax exclusion on the sale of your home. Attorney Burton also discusses the form you should complete upon the closing of the sale of your home in order to document your qualification for this valuable capital gains tax break.
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Transcript of Video: How to Claim the Capital Gains Tax Exclusion on the Sale of Your Home
This video is a follow-up on my video
about how you can sell your home and pay
zero capital gains tax and the thing I
want to emphasize here is that when you
go to sell your home if you know you
owner-occupied it in two out of the
previous five years you want to let your
title company know that so they prepare
this certification at the closing and
each title company will have their own
form but this is an example the IRS puts
on their site and it goes through about
six questions you got to answer here and
certify that it was a primary residence and
I'm just going read the top couple to
show you what it's like and you're going to
put in your name the address of the
property and your tax payer ID number
which is your social security number
and then it's going to have true/false
questions and it's going to say I owned and
used the residence as my principal
residence for periods aggregating two
years or more during the five year
period ending on the date of the sale or
exchange of the residence so that's the
key thing there is that two out of five
years it had to be your primary
residence in order to qualify for this
capital gains tax exclusion then the
second one is I have not sold or
exchanged another principal residence
during the two-year period ending on the
date of the sale or exchange of the
residence so if you remember my other
video I said if you aren't currently
living in the home but it was your
principal residence for two out of the
last five years you can use this capital
gains exclusion only once every two
years so if you move to some other home and
then sold that and recently used it then
you can't go back and use this one until
two years goes by but for most folks if
you just do it once every two years
you're going to be fine
and then it goes down from there for
additional questions about whether
you're single or married but again just
a reminder from my other video if you're
single you can exclude up to $250,000 in
capital gains and if your married it doubles up
to $500,000 and if you're married they're
going to ask questions of you and your
spouse to make sure you both live there
as your primary residence for that two
out of the previous five years so watch
my other video on how all the mechanics
of the exemption works but in general in
that video I talked about how a lot of
people are going to fall into that 15%
capital gains tax rate because for a
single person if you make between
$39,000 and $434,000 and change your
long-term capital gains tax rate is 15
percent and for a married couple you can
make between around $78,000 to $488,000
and you're going to
fall into that fifteen percent capital
gains tax bracket so if you take the max
gain for a single person of $250,000
at fifteen percent that's up to $37,500 in
capital gains you can exclude tax-free
on the sale of your primary
residence and for a married couple
that's doubled to $75,000
so as I've stated previously
that's one of the best tax breaks out
there I know of and if you're looking at
selling your primary residence go
through that test and make sure you're
hitting that two out of five-year rule
so that you can take advantage of this
great tax break on the sale of your
primary residence so thanks for watching
and we'll see you next time!
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Transcript and captions provided for ease of access for the hearing impaired.
For questions about this topic, or to suggest a topic for a future blog post, please contact my office.
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