PHILADELPHIA CONDOS

The new capital gains law allows homeowners to avoid paying taxes on the first $500,000 of profit if they are married or on the first $250,000 if they are single. You must have lived in the home as your primary residence for two of the last five years. You are allowed to use the provision as often as you like, as long as it fits in that two year period. Any gains above the limit will be taxed at the new 20% capital gains rate.

Time Frames

If you bought and sold a home within 1 year, any capital gains would be taxed as regular income. If bought and sold between 1 and 2 years, gains would be taxed at the long term capital gains rate. Filing an extension may be a consideration, talk with a your accountant or lawyer for advice. Needing to sell and move for specific reasons may have cause for exclusion of gains tax prior to two year ownership.

Save Reciepts

Always save receipts for home improvements in a "house file". If you don't qualify for the 2 year ownership rule, the cost of improvements can be used to offset capital gains tax you may have after the sale of your property.