Saturday, July 24, 2004
Military Tax Tip: Selling Your Home
Have you sold a house since May 6, 1997?
If so, you may be able to save yourself a boatload of money this year. I mean, thousands of dollars in some instances.
Here's how:
In order for you to qualify for the capital gains tax exclusion, the law normally requires sellers of houses to have owned the home for at least two years, and to have actually lived in the house for at least two years of the last five.
But this requirement is an onerous one for military families, who are routinely undergo PCS (permanent change of station) moves every one to three years--and are often deployed in the interim.
Under the new tax law, though, military people can 'stop the capital gains' clock for service-related deployments.
That means that if you bought a house, say, in 1995 but PCS'd in 1998, and sold the house in 2003, having spent all that time away from the home at different duty stations, you can still qualify for the exemption, even though you hadn't lived in the home at all for five years.
The reason: The clock stopped when you PCS'd.
The law was written to apply retroactively to May 6th, 1997. But you can work the law to your benefit going backwards and forwards. Meaning that you can claim a new exclusion on a home you sold years ago. Or, you can now sell an existing home (into a hot real estate market) and claim an exclusion, even if you haven't lived in the house for more than five years. Which may or may not influence your decision to sell.
Some caveats:
1.) You can only stop the clock for 10 years.
2.) You can only stop the clock on one residence at a time.
3.) The transfer or duty station has to be 50 miles away from the house or more, and for a minimum of 90 days.
And yes, normally you have only three years to file an amended return. But for this provision the deadline has been extended to November 10th, 2003.
In order to file an amended claim the credit--and potentially get a huge refund--fill out a form 1040X. Write "Military Family Tax Relief Act" across the top of the form, in red ink.
Splash, out
Jason
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If so, you may be able to save yourself a boatload of money this year. I mean, thousands of dollars in some instances.
Here's how:
In order for you to qualify for the capital gains tax exclusion, the law normally requires sellers of houses to have owned the home for at least two years, and to have actually lived in the house for at least two years of the last five.
But this requirement is an onerous one for military families, who are routinely undergo PCS (permanent change of station) moves every one to three years--and are often deployed in the interim.
Under the new tax law, though, military people can 'stop the capital gains' clock for service-related deployments.
That means that if you bought a house, say, in 1995 but PCS'd in 1998, and sold the house in 2003, having spent all that time away from the home at different duty stations, you can still qualify for the exemption, even though you hadn't lived in the home at all for five years.
The reason: The clock stopped when you PCS'd.
The law was written to apply retroactively to May 6th, 1997. But you can work the law to your benefit going backwards and forwards. Meaning that you can claim a new exclusion on a home you sold years ago. Or, you can now sell an existing home (into a hot real estate market) and claim an exclusion, even if you haven't lived in the house for more than five years. Which may or may not influence your decision to sell.
Some caveats:
1.) You can only stop the clock for 10 years.
2.) You can only stop the clock on one residence at a time.
3.) The transfer or duty station has to be 50 miles away from the house or more, and for a minimum of 90 days.
And yes, normally you have only three years to file an amended return. But for this provision the deadline has been extended to November 10th, 2003.
In order to file an amended claim the credit--and potentially get a huge refund--fill out a form 1040X. Write "Military Family Tax Relief Act" across the top of the form, in red ink.
Splash, out
Jason
