J. William Seabrooke CPA P.C.

The goal for the information in this website is to disseminate  information, and not to provide tax advice.

You should review the appropriate Federal and state tax rules, and work with your tax return preparer, if you are planning to sell a “home”, even if it is not your “main” home.  IRS Publication 523 (“Selling Your Home”) is an excellent place to start.  http://www.irs.gov/pub/irs-pdf/p523.pdf   There is a wealth of information in this 40-page document. 

If you received or were eligible for the “First-Time Homebuyer Credit” in 2008 you should also review the instructions for Form 5405 at http://www.irs.gov/pub/irs-pdf/i5405.pdf  The provisions of this tax credit went through several changes from 2008-2010.  For example, if you received the tax credit for a home that was purchased in 2008, the “tax credit” was in fact a loan that is subject to repayment beginning in tax year 2010.   If you have sold your main home that qualified you for the credit, the entire amount of the previously received credit was an addition to your 2010 tax liability.  If you still live in that main home, your re-payment requirement commenced in 2010 and is due to be repaid in equal amounts over the next 15 years.

Additional points to consider are:

• A “Main Home” can be a house, houseboat,  mobile home, cooperative apartment,  or condominium;
• For the year of the sale, and if you meet the requirements, you may be able to exclude up to $250,000 of the “gain” on the sale.  Married taxpayers filing a joint tax return may exclude up to $500,000.  “Losses” on a sale are not deductible;
• The “gain” exclusion tax benefit is applicable only for the sale of your “main” home.  Second homes do not qualify and are usually subject to capital gains tax treatment;
• There is a requirement for you to have actually lived in your main home for two of the five years prior to the sale.  However, if you are qualified, there are special rules for a reduced exclusion amount if the reason for the sale is a) change of employment location, b) health reasons, or c) “unforseen circumstances”, all of which are defined in the publication;
• Additional special rules and calculations are applicable if you used your main home for your business or as rental property;
• Be sure to keep a complete (all pages), signed copy of the Housing and Urban Development form (HUD-1) from both the purchase and sale of your old home, and the the purchase of your new home; 
• The rules will apply if your former residence is no longer your “main” home (i.e. you retired, moved from New York to Florida, and you did not sell your former residence in New York).  (more…)