Selling Your Home?


Selling Your Home? image

Don’t Miss Out On This Tax Opportunity!

For the past 22 years and counting, Section 121 of the Internal Revenue Code has allowed homeowners of all ages to exclude gain on the sale of a “principal residence.” In simplified terms:

Provided three tests are met:

(1)  You owned the home for two of the five years preceding the sale (the “ownership test”)

(2)  You used the home as your principal residence for two of the five years preceding the sale (the “use test”), and

(3)  You haven’t taken advantage of the Section 121 exclusion in the two years preceding the sale (the “once-every-two-years rule”).

Note:  The maximum exclusion, as a general rule, cannot exceed $250,000 for Single filers and $500,000 for Joint filers.


How it works:

In its most basic form, the exclusion works like so:

Example: X, a single taxpayer, purchased a home as his principal residence for $330,000 on June 3, 2013. He resided in the house the entire time, and spent $20,000 improving the home. On July 15, 2019, X sold the home for $450,000, recognizing $100,000 in gain.

Equation: ($450,000) - ($330,000 + $20,000) = $100,000 in gain

Because X owned and used the home as his principal residence for at least two of the five years prior to July 15, 2019, X may exclude up to $250,000 of gain; thus, X may exclude the entire $100,000 gain. This is how the gain exclusion works in its simplest form, but just like many sections in the Code there are many other hidden opportunities and potential quirks to this gain exclusion.


HiAccounting Tax Experts Can Help You Navigate This Opportunity!

Our tax experts at Hawaii Accounting can help you navigate the sale of your principal residence home to ensure you are able to maximize your tax savings. Our CPAs and business advisors have many years of experience with these transactions and can make sure you don’t miss out on this important tax opportunity!


Ready to talk about your tax needs?

We provide a free call to learn more about you and your needs, to identify all tax savings opportunities. Call us today at 808.529.9990!


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