Beware of Capital Gains From Previous House Sales |
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Unless the taxpayer qualified for the over 55 exclusion, profits from home sales prior to May of 1997 were generally deferred into the replacement home. This, in effect, reduced the tax basis of the replacement home, so that when it is sold, the profit from the previous home are taken into account when determining the overall profit from both homes.
Divorce Doesn't Untie the Mortgage Knot |
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Often, when a couple separates and divorces, one spouse continues to live in the family home. Frequently, the departing spouse will simply quitclaim the property to the spouse retaining the home. When filed, the quitclaim deed takes the departing spouse's name off the title. However, it does not remove that spouse's name from the mortgage.
Exclusion of Gain from a Taxpayer's Main Home |
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Unless they meet the reduced exclusion qualifications, taxpayers must meet the ownership and use tests in order to qualify for exclusion of gain.
Qualifying as a First-Time Home Buyer |
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Each taxpayer who qualifies as a "First-Time Home Buyer" can make a $10,000 penalty-free withdrawal from an IRA to purchase a home. (Please note that even though the withdrawal might be penalty-free, it is still taxable).
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