The new Housing Assistance Tax Act of 2008 has made some changes to the capital gains that must be paid when you profit from the sale of your home. If you have sold your main residence, you can now exclude up to $500,00.00 in capital gains from your income tax.
The amount that can be excluded will be based on the percentage of time you lived in your home as the primary resident. If you used your home as anything other than your primary residence then your gains must be separated between qualifying and non-qualifying use. This allocation will not take effect until January 1, 2009.
Qualifying Use
If you have used your home for your primary residence then you are able to deduct up to $250,000.00 for single filers and $500,000.00 if you are married and filing jointly. You must have used your home for your primary residence for at least two years out of the five years ending on the date that the home is sold. Your real estate will be able to hold on to its qualifying status if there is an absence in the home due to a change in job, health problems, or certain types of unforeseen changes.
Non Qualifying Use
If your home was not used as your primary residence. Any type of short term absence from the home that does not exceed a total of two years will still be considered qualifying use. If you used your home as your primary residence but you did not meet the time test to qualify then you are able to allocate your capital tax gains. This means that the time you lived in your home will be allocated as qualifying use and therefore will become tax deductible.
Please visit TurboTax Online with all of your capital gains tax questions. TurboTax online offers free tax calculators and deduction maximizers to help you get the most deductions possible.
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