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Perspective | The IRS allows you to exclude $500000 in profit when you sell your home. How to know if you qualify. – The Washington Post

How you allocate the cash is important. If, for some reason, you allocated $500,000 to the sale of the home and $500,000 to the sale of the lot, you’d pay…….

How you allocate the cash is important. If, for some reason, you allocated $500,000 to the sale of the home and $500,000 to the sale of the lot, you’d pay no taxes on the sale of the home but would have a $490,000 profit on the sale of the lot so instead of paying capital gains and the 3.8 percent Net Investment Income Tax on $250,000, you pay it on $490,000. Obviously, the IRS would get a larger portion of that check.

Source: https://www.washingtonpost.com/business/2021/11/10/irs-allows-you-exclude-500000-profit-when-you-sell-your-home-how-know-if-you-qualify/

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