How the Taxpayer Relief Act works
Dear Mr. Feichthaler:
My tax preparer told me that people over 55 get a one-time $125,000 exemption from income taxes from the sale of their home. I am 68 years old and plan to sell my house later this year, that I purchased back in 2010. How much of an exemption will I get?
— Mary R.
One of the best deals going is the exemption available on the sale of primary residence. However, the law your tax preparer is referring to has not been the law since 1997. Prior to that time, those 55 and over could obtain a one-time exemption on profit on their house of $125,000, or $250,000 for a married couple. The Taxpayer Relief Act of 1997 changed this, providing that homeowners of any age can exclude $250,000, or $500,000 for a married couple, on the sale of their home. Additionally, the “new” law allows owners to take advantage of this exemption every two years, rather than a one-time exemption. Especially in the rapidly increasing real estate market that we just experienced, this exemption can save seller tens of thousands of dollars. Remember, the exemption applies to the profit on the sale, not the gross sales price, so most homeowners can sell their primary residence with no tax issues.
A form needs to be filed with the IRS with your tax return to officially claim the credit. It is important to file that form, since every sale of real estate is reported to the IRS. As for your tax preparer, who is still relying on the laws from the 1990s, you may want to consider a new provider!
Eric P. Feichthaler has lived in Cape Coral for over 35 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Museum of History, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at email@example.com, or 239-542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.