WHAT IS THE PRINCIPAL RESIDENCE EXCLUSION AND HOW DO I KNOW WHETHER I QUALIFY?
Taxpayers who sell or exchange a principal residence after May 6, 1997 can exclude up to $250,000.00 on a single return or up to $500,000.00 on a joint return of unrealized gain. A residence includes houseboats, trailers, condos, and co-ops. Gain is computed by subtracting from the gross sales price the selling expenses, cost of improvements, and adjusted basis or original cost which is reduced by any previously deferred gain. Taxpayers must meet three tests to qualify: (i) The taxpayer(s) must have owned the residence for at least two of the last five years ending on the date of sale. In the case of a couple living in the residence, only one taxpayer/owner needs to meet the test. (ii) The taxpayer(s) must have used the residence for at least two of the last five years ending on the date of sale. Both occupants must meet this test, but the time does not have to be consecutive. (iii)The taxpayer(s) must not have used the $250,000.00/$500,000.00 exclusion for any residence sold or exchan
Related Questions
- Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test?
- The principal residence in which I live is on a ranch that is owned by a family corporation. Do I qualify for the credit for property taxes?
- WHAT IS THE PRINCIPAL RESIDENCE EXCLUSION AND HOW DO I KNOW WHETHER I QUALIFY?
