Installment Sales Benefit Property Buyers And Sellers

The $250,000 principal residence sale tax exemption applies only to your main residence, not to a second home or rental property.

This Internal Revenue Code 121 exemption can be used over and over again, but not more than once every 24 months. To qualify, you must have owned and occupied your principal residence an aggregate 24 of the 60 months before its sale. A husband and wife can qualify for up to $500,000 tax-free home sale profits if they both meet the 24 month occupancy test.

If you want to hold title as tenants-in-common with a co-owner, the deed must specify this. When a tenant in common dies, his share goes to his heirs tenant-in-common or the other tenant-in-common if there was "right of survivorship".

In most states a tenant in common, including the heirs, can force a sale of an investment property by means of a "partition sale." If one co-owner wants to sell but the other does not. Consult a local real estate attorney for details on the best way to hold title with your partner.

Qualifying for Home Sale Tax Exemption

Taxpayers can shelter $250,000 in profits ($500,000 for couples) when they sell a principal residence.

It's difficult for most of us to get very excited about income taxes. But when it comes to earning up to $250,000 tax-free (up to $500,000 for a qualified married couple), have I got your attention yet?

Of course I'm referring to the Internal Revenue Code 121 principal residence sale tax exemption. To qualify, you must have owned and occupied your primary home at least 24 of the 60 months before its sale. Only one spouse's name need be on the title but each spouse can qualify for up $250,000 ($500,000 total) tax-free profits if both meet the 24-month occupancy test and file a joint tax return in the year of sale.

The method of holding title doesn't matter. If two individuals not married to each other both hold title and each owns and occupies the principal residence at least 24 of the 60 months before its sale, then each co-owner qualifies for up to $250,000 tax-free capital gains.

Source: Miami Herald, January 12, 2005