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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] We're Both Wrong -- It's a Partial Tax Reduction Posted by SeanW on May 23, 2003 at 6:57 AM In Reply to: Re: capital gains tax posted by Jk on May 23, 2003 at 0:14 AM What I found after a few minutes of searching: http://www.yeske.com/articles/fpa/IRS_home_rules.htm ------------------------------- People who live in their home fewer than two years can take a reduced tax exclusion, but only under limited circumstances. The new temporary guidelines not only clarify those exceptions, but carve out some additional tax breaks. The regulations cover three major exceptions to the two-year qualification rules: a change of employment, health reasons and the catchall “unforeseen circumstances.” Change of employment. You may qualify for a tax savings if you sell your home in fewer than two years from the time of purchase if a “qualified member” of your household—you, a spouse, a co-owner or household member—moves due to a job change. To qualify, you must move at least 50 miles farther than the distance your old home was from your old place of work, though you may qualify under some circumstances even if the distance is less then 50 miles. Health reasons. You may qualify if you must move in order to diagnose or treat a disease, illness or injury for a qualified person, or to receive care for that medical problem. This provision includes cases where you move to care for a sick relative. Unforeseen circumstances. This phrase wasn’t defined in the original legislation. Unforeseen circumstances defined by the IRS now include death, divorce or separation, pregnancy involving multiple births, the sale of your residence because of government seizure, loss due to a man-made disaster or act of war, and severe debt problems How do you calculate the reduced exclusion amount? Say you and your spouse are forced to sell your home 18 months after you buy it due to a job change. The reduced exclusion amount is a percentage of the maximum excluded amount based on the time you lived in the house. In this case, you divide 18 months by 24 months (the 2-year minimum), which is 75 percent. Thus, you can shelter up to 75 percent of the $500,000 maximum normally allowed—$375,000 in profits. Most married couples won’t earn that much profit from a shortened sale, so they usually will be able to shelter their entire profits. Follow Ups: Post a Followup: Name : E-Mail : Subject : Comments: : What I found after a few minutes of searching: : http://www.yeske.com/articles/fpa/IRS_home_rules.htm : ------------------------------- : People who live in their home fewer than two years can take a reduced tax exclusion, but only under limited circumstances. The new temporary guidelines not only clarify those exceptions, but carve out some additional tax breaks. : The regulations cover three major exceptions to the two-year qualification rules: a change of employment, health reasons and the catchall “unforeseen circumstances.” : Change of employment. You may qualify for a tax savings if you sell your home in fewer than two years from the time of purchase if a “qualified member” of your household—you, a spouse, a co-owner or household member—moves due to a job change. To qualify, you must move at least 50 miles farther than the distance your old home was from your old place of work, though you may qualify under some circumstances even if the distance is less then 50 miles. : Health reasons. You may qualify if you must move in order to diagnose or treat a disease, illness or injury for a qualified person, or to receive care for that medical problem. This provision includes cases where you move to care for a sick relative. : Unforeseen circumstances. This phrase wasn’t defined in the original legislation. Unforeseen circumstances defined by the IRS now include death, divorce or separation, pregnancy involving multiple births, the sale of your residence because of government seizure, loss due to a man-made disaster or act of war, and severe debt problems : How do you calculate the reduced exclusion amount? Say you and your spouse are forced to sell your home 18 months after you buy it due to a job change. The reduced exclusion amount is a percentage of the maximum excluded amount based on the time you lived in the house. In this case, you divide 18 months by 24 months (the 2-year minimum), which is 75 percent. Thus, you can shelter up to 75 percent of the $500,000 maximum normally allowed—$375,000 in profits. Most married couples won’t earn that much profit from a shortened sale, so they usually will be able to shelter their entire profits. Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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