IRS Publishes Tax Reminders Regarding Home SalesNews, Offshore Account Update
Posted in on May 31, 2022
With prices climbing dramatically due to inventory shortages and historically low-interest rates early in the year, many U.S. residents have chosen to sell their homes in 2022. In response, the IRS recently published a Tax Tip reminding us of the tax implications of selling a residential property. In this article, Maryland tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, covers some of the highlights:
Taxable Gain on the Sale of a Main Home
Under the Internal Revenue Code, U.S. taxpayers do not have to pay tax on gains they realize from the sale of their main home unless those gains exceed $250,000 for individuals or $500,000 for married taxpayers filing jointly. As the IRS explains, “To claim the exclusion . . . [d]uring a five-year period ending on the date of the sale, the homeowner must have owned the home and lived in it as their main home for at least two years.”
Taxpayers who are eligible to exclude all of the gain from the sale of their home do not need to report the sale to the IRS unless they received IRS Form 1099-S in connection with the sale.
Taxable Gain on the Sale of a Second Home
Taxpayers who sell a second home are not eligible to exclude any of the gains they realize from the sale. However, rental properties and investment properties may qualify for tax deferral under the like-kind exchange provisions of Section 1031 of the Internal Revenue Code.
Losses Resulting from the Sale of Real Property
While few taxpayers are likely to encounter this issue when selling their homes in 2022, losses resulting from the sale of real property are not deductible under the Internal Revenue Code.
Exceptions to the General Rules
While these gain and loss rules apply to most U.S. taxpayers, there are some exceptions. For example, the IRS’ Tax Tip notes that persons with disabilities, certain members of the military and intelligence community, and Peace Corps workers may qualify for additional tax benefits when they sell their homes.
What If You Don’t Report Your Gains From a Real Estate Sale to the IRS?
Failure to report your gains from a real estate sale to the IRS can lead to a tax audit, liability for any unpaid taxes you owe, and liability for interest and penalties. To minimize this liability as much as possible, it is best to proactively address your situation before the IRS contacts you. If you cannot pay what you owe, you may have options available, but you will need to work with an experienced Maryland tax lawyer who can help you choose the best option for your individual circumstances and deal with the IRS effectively on your behalf.
Request a Consultation with Maryland Tax Lawyer Kevin E. Thorn
If you need to know more about the Internal Revenue Code provisions that apply to the sale of residential real estate in 2022, we invite you to contact us for a confidential consultation. To request an appointment with Maryland tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, call us at 240-235-5096, email email@example.com or inquire online today.Share This Post