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Diane Gallagher

Here are six tax facts that every home seller should know about

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Posted: Friday, November 9, 2012 12:00 am

With the election behind us and the New Year vastly approaching, we are almost to the end of the year. Thanksgiving is on its way and Christmas is around the corner, and something most of us do not like talking about. TAXES!! As I was reading from the California Association of Realtors here is some great information from the IRS.

1. If you’ve owned and lived in your home for two of the five years prior to selling it, you can generally exclude up to $250,000 of the gain from your income ($500,000 on a joint return, in most cases).

2. You are not eligible for this exclusion if you sold another principal residence within the past two years and excluded the allowable gain from your income.

3. If you can exclude ALL of the gain from the sale of your primary residence, you don’t need to report the sale on your tax return.

4. If you have a gain on your principal residence that exceeds the allowable deduction, it is taxable.

5. You can’t deduct a loss from the sale of your primary residence. 6. Special rules may apply when you sell a home for which you’ve received the first-time home buyer credit. (See IRS publication 523, “Selling Your Home,” for details.) (Source of information-the IRS) And as always, consult your CPA or tax advisor for more information.

From the National Association of Realtors, here is more information for you about the Mortgage Forgiveness Debt Relief Act. Under federal law, cancelled debt is generally considered taxable income. Since 2007, however, the Mortgage Forgiveness Debt Relief Act has exempted home owners from paying taxes on the amount of money their mortgage lender forgives as a result of a loan modification, short sale, or foreclosure. The act is due to expire at the end of the year, but the bill would extend the relief through 2014.

“Over a quarter of all transactions still involve distressed properties. That is why you must take action now,” the association said in an e-mail sent Sunday. “Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received.” The organization asked its members to contact their elected representatives and tell them to complete their “unfinished business” after the election. Legislation aimed at extending the act has been introduced in both houses of Congress with bipartisan support in all cases. Senate Bill 2250 has 19 co-sponsors and awaits action in the Finance Committee. In the House Committee on Ways and Means, House Resolutions 4202 and 4336 are identical versions of the Senate legislation, and have 47 and 34 co-sponsors, respectively.

This is something that affects many people out there. Please, do your best to support this bill.

As we approach Thanksgiving week, I pray all of you take the time to be thankful for what you have and where it came from. Please remember our country and the veterans that fought for you and me.

Diane Gallagher is the president of the Lodi Association of Realtors and can be reached at larpres2012@yahoo.com.

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