We duly noted a piece in USA Today (which was courtesy of its content partner AdviceIQ) about how consumers should beware of home-selling myths. So, we thought you should be made aware of what we read:
- If I sell, I need to buy another home with the proceeds or owe tax. This is untrue as long as you live in the home as your primary residence for two of the preceding five years. An exemption of the tax on such a residence sale permits up to $250,000 ($500,000 for a married couple) of gain in value over the original purchase price plus improvements to the property.
- If I sell my home, I owe an extra 3.8 percent surtax due to Obamacare. True in only some limited cases. You must research this one with due diligence.
- I can write off against income any loss on the sale of my home. Not true for a primary or secondary home. You generally don’t pay capital gains tax on a gain when you sell your home. Likewise, you can’t take a capital loss if you lose money on the sale. This applies for all personal property not held for investment purposes. If you sell a rental property at a loss, you can write the loss against other investment gains.
So, there’s some good info for you. As the piece said, you should understand these type of half-truths before you sell your home and how they may or may not apply. Certainly, changing homes causes enough stress. We don’t need any more stress than we can handle.