DEAR BOB: Can a couple with one spouse living in one house, and the other spouse living in another house, fulfill the tax requirements to claim the $125,000 tax write-off on both properties? – Victor T.
DEAR VICTOR: There is no $125,000 home sale tax exemption.
Perhaps you are thinking of the $250,000 principal residence sale tax emption (up to $500,000 for a qualified married couple filing a joint tax return) of Internal Revenue Code 121.
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If one spouse owns and occupies his or her principal residence for at least 24 of the 60 months before its sale, that spouse can qualify for up to $250,000 tax-free capital gains under IRC 121.
The other spouse can also qualify for the same exemption on another principal residence owned and occupied by that spouse.
This situation often occurs when two single people sell their separate principal residences before or after getting married. For full details, please consult your tax adviser.
STATE LAW DETERMINES LIMIT TO CONDO FEE INCREASES, IF ANY
DEAR BOB: Is there a limit that a condo homeowner’s association can raise the owner’s monthly maintenance fees? – Les B.
DEAR LES: The answer depends on the state law where your condo is located and also the condo association’s by-laws, which might contain a limit.
For example, I own a condo where the monthly fees can be raised up to 20 percent per year by our board of directors. Above that, the members must approve additional increases by a vote. Thankfully, that has never happened.
Many states also have laws on special assessment limitations. For details, please consult a real estate attorney where your condo is located.
AGE OF HOME SELLER IS IRRELEVANT TO TAX EXEMPTION
DEAR BOB: My father passed away about two years ago. He left his house to my brother and me in his living trust. The house was valued at $450,000 at the time of his death. Today, it is worth $525,000. My brother and I are both over 55, so we have that one-time limit on capital gains tax. What is the best way to minimize our tax when we sell this house? – Bryan A.
DEAR BRYAN: There is no “over-55” rule limit for capital gains tax on the sale of a home. Where did you hear that crazy rule? It’s not true. The age of a home seller is irrelevant to any federal tax exemption.
If you and/or your brother are full-time occupants of the house as your principal residence for at least 24 of the 60 months before its sale, either or both of you can qualify for the Internal Revenue Code 121 tax exemption up to $250,000.
If the house is not the principal residence of either co-owner, when you sell it, the capital gain difference between the $450,000 “stepped-up basis” on the date of each and the net sales price will be taxed as a capital gain. For details, please consult your tax adviser.
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