{"id":3676,"date":"2024-01-15T07:00:00","date_gmt":"2024-01-15T12:00:00","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=3676"},"modified":"2024-04-25T23:17:00","modified_gmt":"2024-04-26T03:17:00","slug":"capital-gains-were-profits-on-your-2023-home-sale-exempt-head-form-1099-s-off-at-the-pass","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/capital-gains-were-profits-on-your-2023-home-sale-exempt-head-form-1099-s-off-at-the-pass\/","title":{"rendered":"Capital Gains: Were Profits on Your 2023 Home Sale EXEMPT? Head Form 1099-S Off at the Pass."},"content":{"rendered":"\n
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People who sold their homes in 2023, after living in them for a while and enjoying their low mortgage rates<\/a>, have seen big gains in their property values. Fortunately, most of these gains won\u2019t be taxed.<\/p>\n\n\n\n

If you sold a home<\/a> in 2023, your lender or broker may give you Form 1099-S<\/a>. Federal law requires the party responsible for closing your deal (this could be an escrow agent or title company) to send these forms out, filled in with the closing date and proceeds of the sale.<\/p>\n\n\n\n

Form 1099-S only needs to be sent to sellers who have taxable gains to report on their 2023 returns. Read on to find out why most home sellers won\u2019t have to report their home sale to the IRS! (You still may choose to report the sale on your return, even if not required.)<\/p>\n\n\n\n\n\n\n\n

If you get the 1099-S, a copy is on file with the IRS. You\u2019ll need to report your capital gains on your federal return. If you want to avoid this, act now. Before February 15, 2024, send a statement to your title agent that all the profit on your sale is excluded from capital gains tax. <\/em><\/strong><\/em><\/strong><\/pre>\n\n\n\n
Can You Skip Capital Gains Tax, Using the Principal Residence Exclusion?<\/h2>\n\n\n\n
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First, what are capital gains? You take the purchase price your buyer paid for your home. Subtract the agent commissions, appraisal costs, recording and escrow fees. Subtract your cost basis. That\u2019s what you originally paid for the home (including brokerage fees, commissions, recording fees, etc.). Add the price of upgrades you might have made. Now you have a total for capital gains. You would pay capital gains tax only on that amount.<\/p>\n\n\n\n
If you owed any.<\/p>\n\n\n\n
Whether you sold a home in 2023, or want to sell in the future, you can skip capital gains taxes on profits for the sale of your primary residence, up to $250,000.<\/p>\n\n\n\n
Under what provision?<\/p>\n\n\n\n
It\u2019s known as the principal residence exclusion<\/em>. Through this exclusion, the Internal Revenue Service (IRS) lets home sellers keep their profits, up to $250K (if they\u2019re filing singly; it\u2019s $500K for spouses filing jointly).<\/p>\n\n\n\n
And you\u2019re entitled to the exclusion every two years.<\/p>\n\n\n\n
Note:<\/em><\/strong> In this article, we take a look at the federal rules. You\u2019ll still need to check your capital gains tax by state<\/a>, so put that on your list of tax items to cross off.<\/p>\n\n\n\n
The Two-Year Residence Rule Is Firm, Yet Flexible.<\/h2>\n\n\n\n
What if you\u2019re selling, but haven\u2019t lived in the home for the last two years? Even then, you might not need to pay capital gains tax.<\/p>\n\n\n\n
Living in a home any<\/em> amount of time that adds up to two years out of the recent five-year window<\/em> gets you the two-year principal residence exclusion<\/a>. In other words, up to $250K in sale profits is yours to keep tax-free if you lived in the home for at least 24 months of the five years leading up to its sale. Married filing jointly? Then you both needed to live there for the 24+ months, although only one of your names on the deed is all it takes.<\/p>\n\n\n\n
Quick Q&A:<\/p>\n\n\n\n